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What types of disability insurance are there?

UPDATED: February 24, 2015

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Individual disability insurance may be purchased privately by you, or it may be purchased as part of your insurance benefits package through your employer. Payment for disability insurance may also be provided by the Social Security Administration and/or by workers compensation if you qualify for either. When you do purchase or obtain disability insurance, either on your own or through an employer, the coverage may be long term disability insurance or short term disability insurance.

Understanding Disability Insurance

Short term disability insurance can provide you with a replacement for your wages if you become temporarily unable to work. This is often a good type of disability insurance to have, since the Social Security Administration provides no coverage for those who suffer only a temporary disability.

Long term disability insurance, on the other hand, will provide you with a more permanent income replacement if you suffer an injury or illness that renders you unable to work for long periods at a time. This may supplement or even replace long term disability benefits offered by the Social Security Administration to covered workers.

Types of Long Term Disability Insurance

Generally, there are three major types of individual long-term disability insurance policies:

(1) Non-cancelable policy: your premiums are fixed over the term of the policy. The insurer cannot increase rates, decrease your benefits, or cancel or refuse to renew the policy as long as you pay your premiums on time.

(2) Guaranteed renewable policy: the insurance company cannot change your benefits if you pay your premiums on time, but it can increase your premium on a policy anniversary as long as it makes a similar premium increase for your entire class of policyholders.

(3) Conditionally renewable policies: your premiums can go up and your coverage canceled in the event any conditions stated in the policy are triggered.

Workers Comp and SSA Disability

Both workers comp and SSA disability are not purchased by an employee. Workers comp will provide benefits if you sustain an injury while engaged in your required work duties. It generally begins to pay for lost wages as soon as a set amount of time is missed from work, and will provide you with either temporary or permanent benefits, as well as benefits for either partial or total disability.

SSDI, or social security disability insurance, will kick in only for long-term disabilities that render you totally unable to work. You must also meet various income and work-hour requirements to qualify for this type of disability insurance. 

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