If you work, you should have at least a passing knowledge of disability insurance, no matter what kind of job you have. Disability insurance is not just for people who are employed in dangerous lines of work, such as construction or transportation; anyone can get stuck spending time out of work for an injury or illness, regardless of whether it’s related to the job.
Many employees are confused about disability insurance, however, because there are several different ways to ensure you get some form of income if you are unable to work.
4 Types of Disability Insurance Coverage
Here are the different types of coverage you may be eligible for to protect you in the event that one day you’re unable to work because of injury, mental or physical illness, or, in some cases, pregnancy.
1. Social Security
While there is no federal disability insurance, Social Security may cover you if you have a medical condition expected to last at least a year or result in death. Coverage also depends on your past work history and current work conditions. The decision on whether you qualify is made by a federal agency that considers your medical history and statements from your health care providers. This process can take a long time, so if you think it may apply to you, get the ball rolling on making your case as soon as possible.
2. State-Run Disability Insurance Plans
Some states provide their own statutory disability insurance plans, funded by employee contributions that employers may (but are not required to) cover. Contributions are tax-deductible on employees’ federal tax returns. Qualifications, regulation, length of award and other details vary widely.
3. Group Disability Insurance
Group disability plans are provided by an employer as part of a benefits package and may be part of a collective-bargaining agreement negotiated by a union. The group may be a pool of employees or the members of a specific bargaining unit.
4. Private Individual Disability
Employees may purchase individual disability insurance on their own through a private company if this benefit isn’t provided by their employer.
Disability Insurance Variables to Consider
As you can see, there are different types of disability insurance, some of which can work together to support you in the event you’re unable to work. If you are in a position to apply for disability insurance benefits or are looking to add disability insurance to your overall financial planning efforts, remember that there are many variables to consider, including:
- The coverage available in your state, and whether a pregnancy is covered.
- Deadlines for applying for benefits after you’ve been injured.
- The percentage of your income that you will be paid if you have to make a claim.
- Whether the money you receive after filing a claim is taxable.
- How long the payments will continue after a claim has been accepted.
- Whether there is a cap on payouts.
- What physical qualifications you must meet – length of illness or severity of injury, for example – in order to qualify for payments.
- What doctors will need to provide information about your illness or injury in order to qualify.
- Which of the four types of insurance explained above will pay the benefits if you are covered by more than one policy.
- Whom to notify when you are cleared to return to work.
Talk to your HR manager about the disability benefits that are available through your employer to get the best information about disability insurance you may be eligible for. Knowing your options will help you make an informed decision.