Best Disability Insurance Companies
Most people are aware of the need to buy life insurance to protect their loved ones in case of death. But what happens if you get sick or injured and cannot work? Not only does your income need to be replaced, but you may also have additional bills for your care. This is where disability insurance comes in. A disability insurance policy seeks to replace your lost income when you are unable to work or make the same amount of money as before.
What is disability insurance?
Disability insurance provides monthly income benefits in case you lose your ability to earn a paycheck. There are both short-term and long-term disability policies, which cover temporary and more permanent injuries and illnesses.
Policy premiums are determined by a number of factors, including your age, the monthly benefit, waiting period, and length of benefits. Many policyholders adjust these factors to create a policy that balances coverage needs and affordability.
In most cases, there is a waiting period from the date of illness or injury before benefits start. This time is also known as the elimination period. After this time passes, you'll receive monthly income until you are eligible to work again or your benefit period expires.
Why is purchasing disability insurance important?
While many people focus on life insurance to replace income in the event of death, disability can be a much greater risk to their finances. According to the U.S. Social Security Administration, 25% of Americans will experience a disability at some point in their careers before retirement, yet two-thirds of workers don't have disability insurance. When disability strikes, most households don't have adequate savings to cover expenses if one adult cannot work.
This is where disability insurance steps in. It provides monthly income to replace a portion of your lost income to help you pay your bills. While some employers offer optional disability insurance as a benefit, these policies are often not as robust or customized to your needs as a policy that you purchase on your own.
Benefits of disability insurance
Disability insurance policies provide peace of mind and a security blanket in case you lose your ability to work. While health insurance helps to pay for medical bills and treatment of your injury or illness, it does not help with your other financial obligations. An emergency fund can help with short-term disabilities, but those funds can dry up quickly and leave you vulnerable in case other emergencies arise.
- Provides income when you are unable to work.
- Covers the gaps of an inadequate emergency fund.
- Customizable to your budget and needs.
- Riders can be added to provide additional benefits.
The disability insurance process and timeline
Many online companies have streamlined the disability insurance application process. Instead of needing to meet with an agent to discuss options, submit to medical exams, and wait for underwriters to process the application, some policies receive instant decisions online. This drastically reduces the time from application to approval so that you can be covered right away instead of taking weeks.
When you apply online, you should expect to spend 15 to 30 minutes completing your application. Some companies provide an instant coverage decision based on your online answers. For other insurance companies, you may have to speak with an agent to review your options or finalize the policy. While this adds to the timeline, some customers prefer to be able to speak with a licensed agent to get all of their questions answered by a live person.
Once your application is approved, your coverage should begin immediately after you've made the first premium payment. While some companies offer monthly premiums, you'll typically save money if you can pay for the entire year all at once.
Types of disability insurance
Disability insurance policies are available for both short-term and long-term disabilities. Each policy covers benefits for a specific timeframe. Some people buy both types of disability insurance so that they are covered in case of any major illness or injury.
Short-term disability coverage is for temporary illnesses or injuries that keep you out of work for a short period of time. Terms vary by provider, but the typical coverage period is three-to-six months. This insurance typically replaces 60% to 80% of your income when you're unable to work.
Long-term disability insurance covers out-of-work situations that are expected to last for years. It also provides 60% to 80% of your income, depending on your policy benefits. Many of these claims are for severe or permanent disabilities that the insured is not expected to recover from. Coverage terms are typically 5, 10, or 20 years. However, some policies extend benefits until you reach retirement age.
Another factor to decide upon is whether the coverage is for your "own occupation" or "any occupation."
Own occupation. Own-occupation disability insurance provides a monthly income if you are unable to work in your regular occupation. This insurance pays out even if you can work a different type of job. For example, if a surgeon hurts their hand and is unable to perform surgeries, they could get paid out even if they took another job as a teacher or consultant.
Any occupation. This disability policy provides payment only in situations where you are unable to work in any occupation. However, some courts have required insurance companies to pay claims if the insured is unable to perform occupations that they are suited for based on education, experience, and training.
How to compare disability insurance policies
When comparing disability insurance policies, price shouldn't be the only factor that you look at. Just because a policy costs less, does not make it better. A low-priced disability insurance policy may be cheaper because it provides fewer benefits, has more exclusions, and is tougher to get claims approved.
Here are the primary factors that you should compare when evaluating disability policies from competing insurance companies:
Application process. Are you able to complete your application and purchase coverage online, or do you have to speak with an insurance agent to finalize your policy?
Medical exams. Some insurance companies require an exam before your policy can be approved, while others do not.
Short vs. Long-Term Disability. Make sure that you're comparing disability insurance policies that cover the same type of disability.
Own vs. Any Occupation. Are you eligible to go back to work without forfeiting your disability payments?
Waiting period. How long do you have to wait until benefits start getting paid?
Benefit amount. This is the amount that you'll receive each month during your disability coverage period.
Coverage period. How long will you receive monthly benefits? Some long-term policies provide coverage until you reach retirement age.
Claims process. What is the claims process like? Can you submit claims online or do you have to speak with the insurance company? And how long does it take (on average) for a claim to be processed?
An overview of the top disability insurance providers
Our Favorite: Breeze
Breeze is our choice for the best overall disability insurance provider. The company offers multiple insurance products to cover loss of income – short-term disability, long-term disability, and critical illness insurance. You can get a quote in seconds through its simple online process and eligible applicants can skip the medical exam. Once approved, you'll receive same-day coverage and long-term disability premiums start at just $9 per month.
Best for Quick Claims Payout: Haven Life
Haven Life is the online insurance platform backed by MassMutual, one of the oldest and most reliable insurance companies in the U.S. You can apply online in minutes and get an instant decision without a medical exam. Its policies are affordable, with short-term disability coverage starting at less than $10 a month. If you need to file a claim, you can file it online at any time and receive benefits in as little as seven days (after your waiting period is over).
Best for Low Premiums: Asteya
For the lowest disability insurance premiums, Asteya is our choice. Its application is easy to complete online and approved policies are issued instantly without proof of income, medical exams, or phone interviews. Disability insurance is available to supplement your employer benefits or as a standalone policy. Policies are even available for freelancers and entrepreneurs who usually don't have access to traditional workplace benefits. You can get disability insurance from Asteya starting as low as $6 per month.
Best for High Income: Mutual of Omaha
Mutual of Omaha is an established leader in the insurance industry that offers many products, including disability insurance. The company offers monthly benefits of up to $20,000 per month for disability periods ranging from 6 months to 10 years or when you reach the ages of 65 to 70 years old. Elimination periods are also customizable from 30 days to 2 years and policies include attractive benefits at no extra charge. While its website offers basic guidelines on premiums, you need to speak with a licensed insurance agent in order to apply and finalize your policy.
Best for Workplace Benefits: AFLAC
You've probably seen commercials for AFLAC with the talking duck while watching your favorite TV shows. AFLAC provides disability and supplemental insurance policies that offer an additional layer of protection on top of traditional medical, dental, and vision policies. Short-term disability policies from AFLAC are only available through workplace benefit plans, but there are no medical questions and it is guaranteed renewable up to age 75. If your company doesn't currently offer AFLAC, let your benefits department know that you're interested in having it as an option.
Best for Doctors: LeverageRx
Doctors have unique skills that require years of education and training and an injury or illness could derail your career. LeverageRx focuses exclusively on healthcare professionals, so they understand the needs of this community. It takes your online application and provides rates and features from the best disability insurance companies. Then, you'll work with a licensed insurance expert to finalize coverage that meets your needs.
- Provides short-term disability insurance for about the price of a movie ticket
- Guaranteed-issue policies with no medical questions
- Policies are guaranteed renewable up to age 75
- Quote policy in 30 minutes or less with instant approval
- No proof of income, medical exams, or phone interviews
- Policies as low as $6 per month
- Quick, online quotes with same-day coverage
- Eligible applicants can skip the medical exam
- Individual long-term plans start at just $9 per month
- Online application with instant decision
- Short-term policies start at less than $10 per month
- Receive benefits in as little as seven days
- Own-occupation disability insurance for physicians
- Marketplace allows you to compare policy options
- Online application, but policies require an agent to finalize coverage
Mutual of Omaha
- Maximum monthly benefit of $20,000 per month
- Built-in policy features offer attractive benefits
- Must be sold through a licensed agent
Frequently Asked Questions
How much does disability insurance cost?
The cost of disability insurance varies based on a number of factors. Short-term and long-term disability are two different types of policies that cover different scenarios. Many people consider buying both types of disability insurance to ensure that they're protected in every situation.
Your disability policy's premiums are affected primarily by these factors:
- Your age
- Answers to application questions
- Waiting period
- Monthly benefit amount
- Length of benefits
- Own vs. any occupation
What is the difference between long-term and short-term disability?
Short-term disabilities are temporary illnesses and injuries where you expect to return to work once you've recovered. The waiting period for these policies is shorter and payouts generally last three-to-six months or less. Long-term disabilities are injuries or illnesses that are permanent or that take substantially longer to recover from. In most cases, payouts are expected to last for years and possibly until an insured reaches retirement age.
Do I need disability insurance if I'm covered through work?
It depends upon the type of disability insurance offered by your employer. You should compare waiting periods, benefit amounts, length of coverage, and own vs. any occupation coverage from your work policy against other policy options. While premiums are a factor to consider, you want to make sure that any policy you buy has the coverage that you need. Additionally, if you leave your employer, the coverage may not be portable, which means that your insurance will be canceled.
What conditions automatically qualify you for disability?
There are many medical conditions that make you eligible to receive disability payments. Generally, you must undergo a medical exam, receive a doctor's note, or present other evidence for the insurance company to review your claim. Additionally, some disability insurance policies may exclude pre-existing conditions.
Some illnesses are so severe that you're automatically qualified for disability payments when they are diagnosed. These conditions include:
- ALS (Lou Gehrig's disease)
- Organ transplant
- Certain cancers, such as esophageal cancer, mucosal melanoma, or small-cell carcinomas (e.g.: prostate, ovaries, or breast)
What is the maximum amount of disability insurance?
Each insurance company sets a maximum amount of disability insurance that they'll allow an applicant to purchase. Generally, the monthly benefit amount is the lesser of 60% to 80% of your monthly income or their maximum benefit. For example, Mutual of Omaha allows policy benefits of up to $20,000 per month.
Can you have multiple disability policies?
Yes, depending upon the language of each individual policy. Having multiple disability policies is known as a combination plan or "stacking" coverage. When you combine multiple disability policies, you are trying to create the best possible coverage based on the features of each policy. For example, many insurers place limits on disability benefits. Having multiple policies allows you to obtain adequate coverage when your income needs are higher than one company's limits.