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What is Disability Insurance? (What Does It Cost? What Does It Cover?)

Disability Insurance

Car accidents. Diabetes. Cancer. MS. Workplace injuries. 

All things that can leave you unable to perform your current job, affecting your income, and often leading to medical bills.

What would you do if you were suddenly unable to work? How would that impact your family? 

Most people don’t have a solid plan for what they would do if they were suddenly to become disabled. 

And while government disability can aid you and your family if something tragic were to happen, it wouldn’t likely allow you to live the way you are living now.

Insurance companies sell a product that provides income if such a tragedy occurs. Often this product is called long-term or short-term disability insurance.

As an independent insurance agent, I know that my client’s don’t often come looking for this product. But, like life insurance, I know how beneficial this coverage is when the worst happens.

As you read this article, you’ll learn 

  1. What disability insurance covers
  2. How you can purchase disability coverage
  3. What disability insurance costs
  4. How disability policies differ from one another
  5. How does the policy work if you become disabled
  6. Who needs disability insurance


#1 What Disability Insurance Covers

Disability insurance pays you a percentage of your income in the case that you suddenly become disabled. 

Typically, this coverage will pay you anywhere from $500 to $10,000 per month depending on the amount of coverage you purchase.

These payments are not available immediately when you become disabled. A waiting period of 30 days to 365 days may apply depending on your policy.

Adding Riders to Your Policy

Beyond paying a percentage of your income, you can add additional coverages to your policy called riders.

Some of the riders you can add include:

  • Immediate benefits – Your benefits begin as soon as you become disabled.
  • Spousal catastrophic benefits – You can add your spouse as an additional insured on your policy. Then, if your spouse becomes disabled, the policy would pay a percentage of their income.
  • Guaranteed insurability – This allows you to increase your benefits or renew your policy even if you develop a condition that could lead to a disability. For instance, if you develop back issues that could lead to a disability, the insurance company would still have to renew your policy.

#2 How you can purchase disability coverage

There are three ways you could acquire disability insurance:

  • Purchase an individual policy.

Anyone can apply for a disability insurance company through their insurance agent. Like a life insurance policy, these policies are medically underwritten. Whether you qualify for a policy or not will depend on your current health, your type of work, and your age. 

  • Purchase disability as a voluntary insurance product through your employer.

Many employers will offer disability insurance as a voluntary product. In this scenario, you have the option of buying a policy at group rate. You also can not take this kind of policy with you if you leave that employer to work elsewhere.

  • Enroll in a group disability policy through work.

Some employers offer group disability insurance as part of their employee benefits package. In this case, you will not pay for the benefit. Your employer will include it as part of your compensation.

Physical Exam and Medical Tests

Most insurance companies medically underwrite disability insurance. In plain language, this means that they require their insurance applicants to have a physical and consent to testing before offering a policy.

For instance, one company that we write insurance through requires applicants to have a urinalysis. This test will confirm whether the applicant is a smoker, uses recreational drugs, or has the early onset of a serious disease like kidney disease, diabetes, or liver disease.

#3 What disability insurance costs

Disability insurance is not inexpensive. 

Your premium will vary depending on the following:

  • Your age

Your policy will cost less the younger you are. A healthy 18 year old may only pay 1% of their annual income. While an older adult may pay 4% or more of their annual income.

Practically speaking, if you are healthy 18 year old with an income of $20,000 a year, your policy may only cost you $20 a month ($240 a year). 

If you are a 45 year old in moderate health with an annual income of $50,000, you may have to pay $167 a month ($2,000 a year).

  • Your health status

If you are healthy, you will pay less for disability insurance. If you have a health issue like diabetes or heart disease, you will pay higher premiums for disability coverage.

Your weight will also be considered when determining your disability insurance premium. If you are overweight, your policy will cost more.

  • Your smoking status

If you are a smoker, you will pay higher premiums. This includes smoking vapes, cigars, cigarettes, or any other substance. 

  • Your occupation

If you work in a high hazard occupation like roofing or excavating, your rates will be higher. If you work in an office as an accountant or administrator, your rates will be lower.

Some occupations do not qualify for disability insurance at all. If you are a police officer, fire fighter, farmer, coal miner, etc., you may not be able to purchase this coverage.

You may also find it surprising which occupations are considered higher risk. For instance, gas station attendant is a high risk industry. Cashier is also considered high risk. Insurance agencies define high risk by the likelihood of injury occuring on the job.

  • Your income

Since your policy is based on a percentage of your income, the less you earn the lower your premium rates. If you are a high wage earner, your policy will cost more. If you are a lower wage earner, your policy will cost less. 

Insurance companies are not required to provide you coverage. If you do not meet their criteria, you can be denied a policy.

#4 How disability policies differ from one another

You will have some decisions to make when you buy a disability policy. Unless you are purchasing a group disability policy, your policy will not be standard. 

Here are some of the decisions you will need to make:

  • Your waiting period

Earlier I mentioned that your policy will not start providing income the minute you become incapable of working. You will need to decide when you purchase your policy when you want that income to begin. Depending on your financial situation, you can choose between 30 day and 365 days. 

  • Your benefit amount

The insurance company will calculate the maximum amount that you can receive based on a percentage of your income. You do not have to buy a policy for the maximum amount. You can pay to receive a lower amount.

  • Your policy term

Disability policies range from a minimum of two years to a long term policy that ends when you turn 67. You can decide if you need short-term disability or long-term disability coverage.  For instance, if you are a 30 year old father who supports three children and a wife, you may want to purchase a longer term policy so they would have coverage until you turn 67.

  • Your riders

While it will cost you to add riders to your policy, you may want the extra coverage. You will need to select which riders you want added to your policy when you purchase it.

#5 How does the policy work if you become disabled?

If you become disabled, your doctor will confirm that you are unable to work. You will need to submit the paperwork from your doctor for your benefits to begin.

You do not need to qualify for government disability to collect your benefits. Because this is a personal insurance product, your doctor’s confirmation is all that is needed.

#6 Who needs disability insurance?

The answer to this question is very broad. Almost anyone would benefit from the coverage. 

But, because it can be expensive, you will need to make an informed decision about your financial situation, your health status, and your dependents to make a wise decision.

Even so, here is a short list of those who most benefit from this product.

  • Primary wage earners

If you have dependents who rely on your income, you should look into this product. If something happens to you and you cannot work, your family will have to figure out how to make up your income.

  • High wage earners

If you are a high wage earner, this product will help you to maintain your lifestyle if you suddenly lose your income due to the onset of a disability. It will help you to stay in your current home and pay your expenses while you are unable to work.

  • Individuals without someone to assist them

If you live alone and don’t have a support network to help you if you are suddenly disabled, you should look into this coverage. Disability insurance can help pay for assisted living or in-home care if you are unable to care for yourself.  

  • Individuals in a high hazard job

With the increased likelihood of being injured on the job, those in a high hazard job should seriously consider disability insurance. You need to think about your financial stability if you were suddenly unable to work. Could you meet your needs with what you have saved or through other forms of income?

I’m curious what a disability policy would cost for me. How can I find out?

If you’re curious what a disability policy would cost you, you can call your agent and request a quote. The one great thing about insurance is that quotes are free; they only cost you a few minutes of your time.

When you call your agent, they will ask you a series of questions that will help them arrive in the ballpark of what a policy would cost. 

Then, if you decide to move forward with the policy, the insurance company will set up whatever medical exams or testing they require before writing a policy.

After they look at your medical report, the insurance company will present you with a final quote. 

Then, you can decide if you want to purchase the policy.

Buying a disability policy through Baily Insurance

There are only a handful of companies who write disability insurance. As an independent agency, we have access to multiple companies that can provide you with this coverage.

Our team is dedicated to helping our clients build a policy that will meet their needs and desires. At the same time, we work hard to present you with the best price for that product.

If you’d like to get started on a disability policy, wait no longer. In just a few minutes on the phone, we can gather the necessary information to start the quoting process.

If you’d like us to reach out to you, please fill out the form below and share with us what kind of coverage you want. Someone from our team will reach out to you within one business day to talk more about your potential policy.

We’re looking forward to serving you!

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