Your ability to earn an income may be your biggest financial asset. Disability insurance replaces part of it if illness or injury stops you working.
Key points
- Short-term disability usually covers a few months; long-term disability can pay for years.
- Policies typically replace a percentage of income, often around 60%, rather than all of it.
- The elimination period is how long you wait before benefits start.
- ‘Own-occupation’ definitions pay if you can’t do your own job; ‘any-occupation’ definitions are stricter.
- Social Security Disability Insurance has a strict definition of disability and a five-month waiting period.
Most people insure their homes and cars, but far fewer insure their income. Disability insurance pays part of your income if you can’t work because of illness or injury.
Short-term and long-term
| Type | Typical length | Typical use |
|---|---|---|
| Short-term disability | A few weeks to several months | Recovering from surgery or a short illness |
| Long-term disability | Years, sometimes to retirement age | Serious, lasting conditions |
Some states run their own short-term disability or paid leave programs for workers, so check what applies where you work.
Key terms to understand
- Benefit amount: often a percentage of your income, commonly around 60%, up to a monthly maximum.
- Elimination period: the waiting time before benefits start, such as 90 days for many long-term policies. A longer wait usually means a lower premium.
- Benefit period: how long payments can last.
- Definition of disability: “own-occupation” pays if you can’t do your own job; “any-occupation” pays only if you can’t work in any suitable job.
Helpful tip
An emergency fund that covers your elimination period makes a longer waiting period, and a lower premium, more realistic.
Social Security Disability Insurance
SSDI pays benefits to people who have worked and paid Social Security taxes long enough and who can’t do substantial work because of a condition expected to last at least a year or result in death. There’s a five-month waiting period, and approval can take time. It’s a safety net, not a full income replacement.
Do you need it?
Consider how long you could cover your bills without income, what your employer provides and whether others depend on your earnings.
Related guides
If you’re between jobs, see our guide to COBRA and job loss. For broader liability protection, see our guide to umbrella insurance.
Frequently asked questions
Does my employer’s coverage count?
Many employers offer group disability insurance. Check how much income it replaces, how long it pays and whether benefits are taxable.
Are disability benefits taxable?
It depends who paid the premiums. Benefits from a policy you paid for with after-tax money are generally tax-free; if your employer paid, benefits are generally taxable.
Does workers’ compensation cover all disabilities?
No. Workers’ comp covers work-related injuries and illnesses. Disability insurance covers conditions whether or not they’re caused by work.
Can I buy my own policy?
Yes. Individual policies are portable between jobs, and pricing depends on your age, health, job and the features you choose.
This guide is general information, not insurance, tax or legal advice. Rules, limits and deadlines change each year, so check HealthCare.gov, Medicare.gov or your insurer for your situation.