Disability Insurance

Disability Insurance

Already know what you need? Get started on your application by entering your zip code.

Prefer to speak with a CoverWallet consultant? Call (646) 844--9933 anytime

What Disability Insurance Is All About:

Disability Insurance Disability Insurance

No one expects to suffer from a debilitating injury and lose their ability to work and cover daily expenses - but it happens. With Disability Insurance, you can give your employees and their families peace of mind in knowing that they won’t lose everything when something unplanned happens.

If an illness or injury puts you or one of your employees out of work, Disability Insurance ensures a continued source of income.

Read on to see if it’s is something you need for your business and employees.

What Is Disability Insurance?

Disability Insurance covers a portion of an employee’s income when they lose their ability to work due to a non work-related illness or injury. There are two types: short-term and long-term disability plans. Employers can offer either or both depending on their needs.

Short-term disability covers a portion of the policyholder’s salary for a short period, which can vary depending on the policy. However, it’s usually covered for three to six months after the incident that left them disabled.

Long-term disability usually comes into play when the employee holding the policy is disabled to the point of being unable to work for at least six months. It can be extended for years, even until the policyholder retires or reaches the age of 65, in which case benefits will end.

Many business types should consider disability insurance particularly important. Physician disability insurance, for example, is important for healthcare professionals who recognize the difficulties that disabilities can impose on an individual. Disability insurance for self employed contractors is also a good idea, considering the many dangers that exist in contracting work.

Many policies also cover rehabilitation costs that help employees transition back into work faster.

Do I Need Disability Insurance?

You are required to carry short-term Disability Insurance for your employees if you live in a state where this type of insurance is mandatory. States that mandate professional disability insurance include: - California - Hawaii - New Jersey - New York - Rhode Island.

As a small business, you qualify for voluntary group disability policies if… - You employ three or more eligible employees (eligible employees must purchase supplementary health insurance that your business supports, meaning money is withheld from their paycheck to pay for the insurance)

This type of insurance comes in handy if…

  • You have employees, and want to offer them peace of mind that they’ll have income during a catastrophic injury or illness
  • You employ women of childbearing age who might benefit from paid maternity leave offered through short-term disability.

It’s important to note that some businesses do not qualify to offer voluntary disability policies to employees. These include:

  • Fishing, hunting and trapping companies
  • Slaughterhouses
  • Massage parlors
  • Gambling companies, like bingo establishments and video poker
  • Professional sports teams
  • Trucking companies hauling dangerous loads
  • Offshore oilfield services
  • Fruit and vegetable stands
  • Private detectives
  • Catering companies that use trucks
  • Boat and/or shipbuilding and repair businesses
  • Coin-operated amusement centers
  • Military services
  • Railroads
  • Pornographic book stores

Still not sure what you need?

CoverWallet's Insurance Checklist , you'll find a list of insurance types needed for your specific business or industry.

What Does Disability Insurance Cover?

At a High Level...

It replaces income lost due to injury from a catastrophic accident or illness beyond 90 days. It generally replaces 60 percent of the policyholder's income from the previous year, up until retirement age (65 years old).

This type of insurance offers an important benefit if your business employs female employees of childbearing age: paid maternity benefits. Short-term disability covers normal childbirth, ensuring that your employees will be partially compensated while they are on leave.

Getting Into the Details…

Here are examples of some types of claims:

Type of Claim Description
Short-term disability due to injury If an employee is injured in an accident outside of work - like, for example, a car accident - they would be covered by disability benefits.
Long-term disability caused by illness If your employee is unable to work for an extended period of time longer than six months due to a non-work-related illness.
Maternity leave If your employee has a child through normal childbirth, they can receive short-term disability benefits.

You’ll Know It’s the Right Policy If It Covers:

  • Long-term and short-term disability benefits
  • Rehabilitative services
  • Workplace modification and security coordination assistance
  • An Employee Assistance Program (EAP)
  • Optional long-term disability services, such as personal care assistance, 401(k) contribution benefit, spouse disability and dependent disability.

What Does Disability Insurance Not Cover?

Disability Insurance does not cover work-related injuries. It’s important to note the distinction between it and Workers Compensation Insurance. While Workers Compensation Insurance covers your employees for accidents that occur on the job and work-related illnesses, this type of insurance covers employees who are incapacitated due to accidents, injuries and illness that happen outside of work.

Another thing that is important to pay attention to when purchasing this type of insurance for your business: how the carrier defines “disability.” There are two definitions here. “Own occupation” coverage provides benefits when employees aren’t able to perform their current job - even if they could do something else. This is preferable from an employee standpoint. The other type is “any occupation” coverage, which only offers benefits when an employee is disabled to the point of not being able to work at any job, period. Read the fine print and determine which type of coverage is best for you.

Mental and nervous disorders are also often excluded from disability coverage.

What Are the “Limits” on a Disability Insurance Policy?

Short-term disability benefits are typically paid from three to six months after an accident or illness that makes an employee unable to work. Long-term disability benefits can be extended for years, however they won’t apply once the policyholder retires or reaches age 65.

Disability benefits are usually limited to 60 percent of the employee’s wages from the previous year.

How Much Does Disability Insurance Cost?

The cost of both long-term and short-term Disability Insurance usually falls between 0.25 and 0.5 percent of total compensation for companies of all sizes. As a small business owner, you should assess whether you can afford to offer both to employees. Offering this type of benefit is important for retention purposes, as rates for group plans are generally less expensive than individually-purchased policies. There’s also the benefit to the business of getting employees back to work as quickly as possible.

The rates for an insurance policy vary depending on the industry of your business. Disability insurance for physicians, for example, will not cost the same as for mail carriers. This is affected by the perceived risk of workers in your industry, as well as the stability of the workforce. However, the size of your business doesn’t matter: as a small business owner, you are subject to the same rate as a large national corporation. Physicians disability insurance for a small practice will therefore pay the same rate as a large, privately run hospital.

If you’re unable to provide and pay for group Disability Insurance to all employees, providing individual coverage or voluntary employee-paid coverage is an option that should be considered.

Additionally, many small business owners purchase personal insurance policies for themselves as a type of business overhead insurance. This ensures their business can run while the owner is recovering from a disability. It covers standard business expenses, typically including payroll, utilities, rent, etc. However, the salary of the business owner itself would not be covered.

Are you ready to get down to business?

Just click get a quote and you're off.

Get Advice

Need free help? Understand in 10 seconds what type of insurance your industry needs, and why

Insurance assessment »