Types of Disability Insurance

Types of Disability Insurance

There are 5 major types of Disability Insurance:

  1. Social Security is the base. Most Americans have access to Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI). These are safety net programs that catch those who were uninsured or underinsured. Their small benefit levels are near or slightly above the poverty level. You don’t want to have to rely on these benefits as your sole income, but they’re better than nothing!
  2. Workers’ Compensation offers payments to employees who are unable to work because of a job-related injury. Coverage is determined by each State. In many cases, it’s coupled with coverage for injury or death on the job, economic loss from injury, and compensation for pain and suffering.
  3. Group Disability Insurance provided by your employer. These cover employees unable to work because of any injury or illness, even if it is not job-related. Benefit levels are usually basic, but upgraded coverage is often available for an additional premium.
  4. Individual Disability Insurance is available for those who need to purchase their own policies on the open market.
  5. Veterans Benefits are provided by the government and might also cover limited health insurance, disability income insurance, life insurance, and mortgage coverage.

Within these types of disability insurance there are 2 length of insurance breakdowns:

  1. Short Term Disability (STD) is, as the name implies for the short term.  It generally provides coverage from 2 months to a year.  STD is designed to pay a portion of your salary after you run out of sick leave.
  2. Long Term Disability (LTD) replaces a portion of your pay after you have run out of STD.  It’s for the serious career ending events that prevent you from going back to work.

In many cases, STD and LTD are coordinated so that LTD takes over after STD runs out.  STD insurance may have time limits.  If possible, find LTD insurance that will cover you to age 65.