Imagine you wake up one morning and realize you can’t go to work. Maybe you’ve had an accident, you’re recovering from surgery, or you’ve become seriously ill. You need time to recover, but you also have a mortgage or rent, groceries, utilities, and other bills to pay.
What happens to your paycheck while you’re away from work?
That’s where disability benefits come in. Disability insurance can provide you with part of your income when an illness or injury keeps you from working. It won’t replace your entire paycheck, but it can help you continue paying your bills while you focus on getting better.
What Are Disability Benefits?
Think of disability insurance as a safety net for your paycheck.
Health insurance helps pay for doctors, hospitals, prescriptions, and other medical care. Disability insurance serves a different purpose: it helps replace part of the income you lose when you can’t work because of an illness or injury.
Many employers offer two types of disability coverage: short-term disability and long-term disability. While the names may sound complicated, the basic idea is simple.
Short-term disability helps provide income when you can’t work for a shorter period of time. For example, you might need several weeks to recover from surgery or an illness.
Long-term disability is designed to provide income when you can’t work for a much longer period. It may become important if an illness or injury keeps you out of work for many months or longer.
The exact coverage depends on your employer’s plan.
How Does It Work?
If an illness or injury prevents you from working, you generally don’t start receiving disability payments immediately. Most plans have a waiting period before benefits begin. This gives you time to recover from a short absence before the disability benefit kicks in.
If you’re still unable to work after that waiting period, you’ll typically need to file a claim. The insurance company reviews your claim and determines whether your situation qualifies under the plan. If your claim is approved, you’ll receive a portion of your regular income for as long as you continue to meet the plan’s requirements.
For example, let’s say your disability plan replaces 60% of your income. If you normally earn $4,000 a month, the benefit could provide $2,400 a month, subject to the rules and limits of your plan.
That’s not the same as getting your full paycheck, but having some income can make a big difference when your regular expenses continue.
Why Is Disability Insurance Important?
Most people don’t expect to be unable to work because of an illness or injury. But these things can happen unexpectedly, and they don’t always involve a major accident. A serious illness, surgery, injury, or other health problem could keep you away from work for weeks, months, or longer.
Without a paycheck, even a few months can put a strain on your finances. You may have savings, but those savings may not be enough to cover all of your expenses for an extended period.
Disability benefits can help give you another layer of financial protection. They can help you keep up with everyday expenses, reduce the need to use your savings, and give you some peace of mind while you’re focused on your recovery.
What Should You Know About Your Disability Benefits?
Your employer’s disability plan has its own rules, so it’s important to know what your coverage actually provides. During open enrollment, take a few minutes to look at your benefits information and find out how much income your plan could replace, how long you have to wait before payments begin and how long you could receive benefits.
It’s also important to know whether your employer pays for the coverage or whether you pay part or all of the cost. In some situations, the amount you receive from disability insurance may also be affected by taxes or other sources of income.
You don’t have to figure it all out on your own. If you don’t understand your coverage, ask your HR or benefits team to explain it. That’s what they’re there for.
The Bottom Line
Disability insurance is easy to overlook because you may never need to use it. But that’s also what makes it valuable. You don’t buy insurance because you expect something to happen, you have it in place just in case.
Your paycheck helps pay for nearly everything in your life. Disability benefits can help protect that income if an illness or injury prevents you from working.
Take a few minutes to understand your disability benefits now. If you ever need them, you’ll be glad you did.