Types of Disability Insurance

Disability insurance can be an extensive topic to explore. There are several types of disability insurance to suit different purposes and duration of service. Hence, one needs to know the type of disability insurance they are selecting to enjoy maximum satisfaction. 

Types of Disability Insurance


In this post, you’ll get full details on the types of disability insurance. Also, you’ll get other related information on disability insurance to increase your knowledge when you want to purchase it. Hence, stick with this post to the end so you won’t miss anything. 

Top types of Disability Insurance 

Below are the types of disability insurance you should take note of:


Long term Disability Insurance 

Long-term disability insurance pays out monthly benefits if you become too ill or disabled to work. The benefit duration can be two, five, or ten years, or even until you retire. 

It includes a monthly benefit of up to 60% of your total monthly salary. Furthermore, it usually costs between 1% and 3% of your annual income.

According to Policygenius data, the average length of a long-term handicap for someone in their 30s is under three years. As a result, long-term disability insurance offers the best protection against becoming disabled. It’s better when comparing it to other types of disability insurance that pay out benefits for a shorter period.

Types of Long-term Disability Insurance 

There are two types of long-term disability insurance:

  • Any occupation disability insurance: This pays for any occupation only if you cannot work or take a job. However, it must be a job for which you are appropriately qualified but can’t due to illness or an accident. 
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It’s more challenging to prove; therefore, it’s harder to get a payment. Nevertheless, it’s usually less expensive than own-occupation disability insurance.

  • Own-occupation disability insurance: This defines a disability as an inability to work in your primary occupation. Interestingly, it pays benefits even if you can work another job. 

Own-occupation disability insurance comes in three varieties:

  • True own-occupation: You are entitled to benefits even if you can’t work in your occupation due to illnesses or diseases. If you change jobs from your previous one, you still get these benefits. 
  • Transitional own-occupation: Firstly, you must be unable to work in your occupation due to an accident or illness. Afterward, if you receive an offer for a new job that pays less, you are entitled to compensation. This compensation makes up the difference between your new (lower) and old (higher) income.


  • Own-occupation, not engaged: You are entitled to benefits if you can’t work in your current occupation and have not started a new one. If you start a new job, you will lose your benefits regardless of the field.

Short-term Disability Insurance 

Short-term disability insurance, like long-term disability insurance, pays up to 60% of your pre-tax income if you can’t work. The main distinction is that coverage is only available for a year.

Your company frequently offers short-term disability policies (group disability insurance). Also, some states compel companies to provide short-term disability coverage. 

Do not use short-term disability insurance in place of a long-term disability plan. This is because the average disability lasts about three years. 

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Instead, use them as a supplement to long-term plans. This is because the average disability lasts about three years. You can use short-term insurance to pay your living expenses while waiting for your long-term policy to kick in.

Short-term disability policies are also the same price as long-term disability policies. However, the coverage isn’t as comprehensive; therefore, they’re not as cost-effective.

Mortgage Disability Insurance 

Mortgage disability insurance, also known as mortgage payment protection insurance, is a sort of long-term disability insurance. It pays your mortgage if you cannot work due to illness or injury.

Mortgage disability insurance does not require the typical underwriting process or medical exam that other long-term disability insurance policies do. You can purchase it from your mortgage lender, an insurance agency, or a broker. It’s fantastic if you don’t qualify for traditional long-term disability insurance but don’t want to risk losing your home. 

Social Security Disability Insurance 

If you become incapacitated and unable to work, you’ll need money to pay for day-to-day expenses and maintain a living. Some people get disability insurance, which covers a portion of their take-home pay while disabled or for a certain period. Workers who cannot afford private disability insurance may be eligible for Social Security disability benefits (SSDI). 

SSDI pays benefits monthly for the duration of your disability and may be subject to automatic inflation adjustments. As of November 2023 , the average monthly Social Security disability insurance benefit is $1,154.07 in some places. A disabled worker’s spouse and children are also eligible for Social Security disability benefits.

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Although SSDI is a free program, it is notoriously difficult to qualify. According to federal government statistics, it approves just about one-third of applications. Furthermore, the number of years you worked before becoming disabled impacts benefit amounts.

Therefore, younger disabled persons may receive lesser benefits than older disabled people.


State Disability Insurance 

Some states have short-term disability insurance schemes, which employers, employees, or a mix of the two funds. The following states (and US territories) offer state disability insurance, sometimes known as temporary disability insurance:

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

State insurance isn’t available through a broker or agent, and it rarely pays benefits for more than a year.

Even if you have state disability insurance, you’ll be better off getting long-term disability insurance coverage. This is because state disability insurance reimbursements are limited. 

Workers Compensation 

Workers’ compensation, often known as workers’ compensation insurance, is disability insurance. Your firm must carry it in every state as it compensates you if you injuure at work. 

Many people feel that workers’ compensation is a substitute for disability insurance, but it provides far less coverage. If an employee cannot work, workers’ compensation pays a monthly wage only if the injury happened at work.

Supplemental Disability Insurance 

Supplemental disability insurance is an addition to employer-provided disability benefits (which may be taxed or capped). It fills the gap between the latter and the total amount of money you’ll need to cover your expenses.


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