Disability Insurance

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If any of your employees suffer a debilitating injury and lose their ability to work, Disability Insurance ensures a continued source of income for them.

Disability Insurance covers a portion of an employee’s income when they lose their ability to work due to an non work-related illness or injury.

Not to be confused with Workers’ Compensation Insurance, which provides covers for a work-related illness or injury.

What Disability Insurance Is All About:

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What Is Disability Insurance?

Disability insurance for small businesses is typically not mandated by the government. However, the following states make it obligatory for business owners to provide short-term disability insurance to their employees.:

  • California
  • Hawaii
  • New Jersey
  • New York
  • Rhode Island

Most states require employers to carry workers' compensation insurance, which pays benefits for work-related injuries and illnesses. The laws governing workers' compensation differ from state to state.

What Does Disability Insurance Cover?

Getting Into the Details…

Short-term disability 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 illness disability

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.

What are the main types of disability insurance?

  • Short-term disability cover

  • Long-term disability cover

  • Social Security disability cover

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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.

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.

Contact a CoverWallet agent to get a free quote for your company's Disability Insurance.

Frequently Asked Questions

What’s the difference between short term and long-term Disability Insurance?

Short-term disability provides coverage after sick leave runs out, and usually has a short waiting period of a week or less. Depending on the plan, it usually lasts less than a year. Once that is exhausted and the employee is still unable to work due to a disability, then long-term disability will kick in. Long-term will last until retirement age if needed, or if the employee returns to work or is no longer disabled.

Who Is Covered by Disability Insurance?

Your Employees If they are unable to work due to an injury or illness that is not work related, disability will allow them to still obtain wages, and keep their family afloat.


Your Business While there is no direct coverage for your business under disability insurance, providing this extra coverage to motivate good employees will protect your business in the long run.

What are the benefits of Disability Insurance?

The biggest benefit of disability insurance is providing your employees with peace of mind in case they should become injured and can not work for some time. Since it replaces a portion of their income, they can continue to help support themselves and their families.

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.

What Does Disability Insurance Not Cover?

Work-related injuries 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.


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

What is the definition of “disability"?

There are two parts to the definition of "disability":


  1. Own occupation” coverage provides benefits when the disability means that employees aren’t able to perform their current job even if they could do something else. This is preferable from an employee standpoint.


  1. 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.

Does workers’ comp pay more than disability?

The payout from Workers compensation insurance will usually be less than that for short-term disability insurance (roughly 66 percent of pay vs. 80 percent of pay). However, it pays a similar percentage to long-term disability but for a shorter length of time (unless the employee is declared permanently disabled). A CoverWallet agent will explain this in more detail.

Do you need more coverage?

Equipment Breakdown

This insurance protects a broad range of equipment against breakdowns caused by motor burnout, power surges, boiler malfunction, and operator error. Equipment Breakdown covers the cost to replace or repair the damaged equipment, as well as other expenses incurred due to the damaged equipment.

Garage Liability

Small businesses in the auto trade industry need Business Garage Insurance to protect them from a variety of risks, including injuries, mistakes or property damage.

Pollution Liability

This specialized insurance policy covers liability associated with pollution. An Environmental Impairment policy may also cover cleanup costs.

Crime

This type of insurance helps you cover the losses resulting from criminal acts such as robbery, burglary and other forms of theft. Many businesses choose Crime Insurance policies that allow them to file claims for internal theft or other offenses with the potential to cause financial problems.

Employee Benefits Liability

This plan covers an employer in the event of an errors or omissions claim from an employee around a benefits plan. Errors and omissions covered in this plan can include failure to advise an employee of benefits they are entitled to, failure to enroll an employee, and giving incorrect advice in regards to benefits.

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