Most people consider their home to be their greatest asset, but for nearly everyone the most valuable asset is their ability to work and earn a living.
Studies by the Social Security Administration show that a 20-year-old worker has about a 30% chance of becoming disabled before retirement age, and working adults are more likely to become disabled than to die. Yet while many people obtain life insurance, the need for disability insurance is often overlooked.
Disability insurance provides income when the covered individual cannot work because of injury or illness. In the workplace, disability insurance can be provided by the employer, offered on a voluntary basis with employees paying the premium, or provided as a base amount with employees able to buy additional coverage.
There are a variety of disability insurance plan types available in the marketplace; for individual-focused options, see Personal Disability Insurance.
The two general types of disability insurance are short-term and long-term. Short-Term Disability (STD) coverage usually begins when sick days or salary continuation end and generally lasts no longer than about 26 weeks. Long-Term Disability (LTD) coverage is intended for disabilities of extended duration and typically begins after a waiting period such as three or six months, with some plans continuing benefits to retirement age.
Disability benefits commonly replace 60%–70% of the insured's salary, up to policy limits. Some plans let enrollees select a benefit amount from a range, often starting with a monthly minimum benefit (for example, $500 per month) up to a specified maximum.
A key feature of any STD or LTD policy is how it defines "disability." Some policies base disability on the insured's ability to perform the duties of their regular occupation, others use an "any occupation" standard, and some define disability by a reduction in earnings below a specified percentage of pre-disability pay.
When an employee is out of work for an extended time, the vacancy can create significant costs for an employer. Surveys estimate combined sick and disability costs to be in the range of 5%–6% of payroll, and the loss of an employee directly affects productivity.
To make up for lost time, employers often pay overtime or hire and train temporary workers. Statistics also show the longer an employee is away, the less likely they are to return to work, so returning employees as soon as it is safe and appropriate is important.
Strong rehabilitation and return-to-work services are important features to look for in a disability product. Some plans proactively manage disabilities through early and regular contact with medical providers, while others work with the employer, employee, and medical provider to find flexible solutions such as a reduced benefit for part-time return to work.
Employees are valuable, and offering them a chance to protect their earning power is a smart business decision; some employers and industries offer tailored programs such as Elevator Distributors Disability Insurance to meet specific workforce needs.
If you have questions about available options or would like help evaluating coverage, you can talk to an agent about your situation.
Frequently Asked Questions
What is the difference between short-term and long-term disability?
Short-term disability typically covers a temporary period (often up to about 26 weeks) and begins when sick leave ends, while long-term disability starts after a longer waiting period and covers extended disabilities, potentially to retirement age.
How much of my salary will disability insurance replace?
Most disability plans replace about 60%–70% of pre-disability earnings, subject to policy limits and any offsets from other income sources.
How do insurers define "disability"?
Definitions vary: some policies use a regular-occupation standard, others an any-occupation standard, and some use an earnings-based threshold to determine disability.
Can an employer help with return-to-work services?
Yes; many employer-sponsored plans include rehabilitation and return-to-work programs that coordinate with medical providers to support a safe and timely return.