A 20-year-old employee has a 30 percent chance of becoming disabled before he or she reaches retirement, reports the Bureau of Labor Statistics. Only one in three employees is covered by long-term disability insurance, though. Your ability to earn a living remains one of your best assets, so consider the benefits of a group disability insurance policy, including what it is and how it works.
What is Disability Insurance
Your disability insurance provides financial assistance if you lose income because an accident or illness prevents you from working. While your employer often offers group disability insurance as part of your benefits package, it’s your responsibility to understand how much coverage you have and whether that coverage is enough for your needs.
How to Qualify for Disability Insurance
Group disability insurance that’s provided by your employer will include an application process. Expect a paramedical exam to determine your overall health, and you'll give blood and urine samples. Your doctor may also need to complete a questionnaire. Additionally, you will need to submit financial documentation proving your income.
How Much Money You Will Receive
Disability insurance usually replaces between 40 and 60 percent of your salary with a cap of $20,000 per month. However, the exact amount you receive depends on your policy.
When You Will Receive Benefits
The typical wait period for your first disability insurance benefit check is three to six months. Known as the elimination period, this wait time is tied into how long you’re eligible for benefits. Check your group policy for details on the elimination period.
How Long Your Benefits Last
You may be able to receive benefits for two years or longer. In certain cases, your benefits may last until you’re aged 65. Your policy may even include a rider that covers you for as long as you’re alive.
What Does Disability Insurance Cost
A variety of factors — including your income, gender, age, health status, occupation, and the coverage amount — determines the cost of your disability insurance. While your employer often covers the cost of your group policy, expect to pay approximately two to three percent of your income for an individual policy.
Additional Considerations
- You lose coverage when you leave your job.
- You will owe income taxes on your disability insurance benefit checks.
- Your employer may cap the benefits, so check your policy for details.
Disability insurance offers important protection and peace of mind. If your employer coverage isn’t enough, consider researching alternative options such as Personal Disability Insurance to fill gaps in group plans.
For individual coverage tailored to your occupation and income, review options like Individual Disability Insurance and compare features before deciding.
If you decide you need more protection, talk to an agent or your insurance representative to review options and portability if you change jobs.
Frequently Asked Questions
What is the elimination period?
The elimination period is the waiting time between when you become disabled and when your benefits begin, commonly three to six months.
Will employer-provided disability coverage stay with me if I leave my job?
Generally no; group coverage is usually tied to employment, so you may lose those benefits when you leave your job.
Are disability benefits taxable?
If your employer paid the premium for your group policy, benefit checks are often taxable; if you paid with after-tax dollars, benefits are typically tax-free.
How much of my income will disability insurance replace?
Most policies replace between 40 and 60 percent of your salary, subject to policy caps and exact terms.