What exactly is disability insurance?


What exactly is disability insurance?

You’ve probably heard of disability insurance.

It’s possible you even have it through work.

But do you really know what it is and why it’s important? (Be honest.)

“In a nutshell, disability insurance helps protect your income,” says David Polen, disability product director at Colonial Life. “It can pay you money if you are sick or hurt and can’t earn a paycheck. In fact, next to major medical insurance, it’s probably the most important type of financial protection to have.”

Here’s why:

Disability insurance helps pay the bills

Life is expensive. According to a recent survey, most Americans say they spend more than they make or just break even each month. And two-thirds of America’s workers would find it difficult to meet their financial obligations if their paycheck were delayed just one week.

What would you do if you were unable to work for a week, a month or as long as a year?

Disability insurance replaces some of your lost income so you can keep paying the bills and keep your life on track. Even if you return to work part-time, this coverage could continue to pay a portion of your income.

Disabilities are common

Did you know 1 in 4 of today’s 20-year-olds will become disabled before age 67, according to the Social Security Administration? People tend to think disabilities come from major, once-in-a-lifetime accidents or injuries. But for many, disabilities sneak in quietly and are tied to common health conditions.

According to the Council for Disability Awareness, many disabilities are caused by pregnancy, high blood pressure, depression, arthritis and even allergies. Health insurance can help you treat these conditions — and reduce some of the medical costs — but it can’t replace your income if you can’t work. That’s why disability coverage is so important.


How disability coverage works

Disability insurance can be short-term or long-term:

  • Short term disability coverage typically starts sending payments one or two weeks after you become disabled. Payments can continue for several weeks to several months, depending on your policy.
  • Long term disability coverage provides payments for a longer amount of time, possibly for a year or more. This coverage typically kicks in once short-term disability coverage ends, if you have both types of insurance. Some of these plans protect higher incomes, including bonuses and commissions.

Now that you have the basics on disability insurance, it’s time to check with your employer about the types of coverage available to you. It may be one of the most important financial decisions you ever make.