Short-term disability is a pretty common employee benefit and can cover as much as 80% of your income for a few months. If you work in California, New York, New Jersey, Rhode Island or Hawaii, employers are required to offer short-term disability coverage. If you’re in another state, ask your human resources department for details.
Some employers also include long-term disability insurance coverage as an employee benefit. You may also be able to purchase a group long-term disability policy through your company when you’re hired or during open enrollment if they offer supplemental benefits.
Remember, if you get insurance through your employer, the coverage may end when your employment ends unless they have a portability option. Employers can decide to stop providing coverage at any time and or insurance companies can cancel policies. And keep in mind that you’ll probably have to pay taxes on employer-paid disability coverage.
Buying your own policy allows you to customize it depending on your specific needs — which is why some people choose to buy their own coverage even if their employer offers one.
Plus, if you own the policy, your benefits are tax-free.
Individual coverage is a lot more comprehensive, because it’s not tied to your job. If you leave your job, it goes with you across the country. It’s kind of like a shadow — it follows you wherever you go.
If you’re self-employed or want coverage beyond what your company offers, you can buy it directly from an insurance company representative or work with a broker for help. You might also be able to find group coverage through a professional association.
Like life insurance, you’ll have to go through a medical underwriting process, which can feel pretty invasive. Medical underwriting involves answering health questions, giving a blood and urine specimen, providing access to your medical records and prescription history.
You will also need to be underwritten financially since the carrier is replacing lost income. This involves the insurance company reviewing your tax returns, W-2s, pay stubs, and similar documents.
As for how much it costs? Long-term disability insurance premiums vary depending on your income, age, occupation, and lots of other details, but most people spend 1% to 3% of their annual income. The younger you are when you sign up, the lower the premiums are likely to be.