Disability Insurance is coverage purchased to protect an employee from wages lost during a period where the employee is "disabled" (i.e. unable to work). While disabled, income will be paid to the employee weekly or monthly in the form of disability insurance. Individual policies commonly define disability insurance in one of two ways:

  • General-Disability Insurance: Provides benefits to a person who cannot perform any job that the person is qualified for because of sickness or injury. As long as the policyholder can still perform certain jobs that she is qualified for, she cannot recover.
  • Occupational-Disability Insurance: Provides benefits to a person who cannot perform his or her regular job because of sickness or injury.

This distinction can be critically important. For example, if a surgeon loses a hand, she may not be able to perform surgery. If she has an "occupational-disability" policy, she would be able to recover, even though she can still work as a doctor in a non-surgical field. If she has a "general-disability" policy, there would be no recovery, even if the surgeon’s only possible alternative is to be a tour guide.

How Much Income Will My Policy Pay While I Am Disabled?

Your insurance pay out may be stated as a percentage of your income or as a set dollar amount. Your specific policy defines how much you will be paid, how soon after you are disabled payments will appear in your mailbox, and when they will cease. Benefit periods may depend on whether the disability was caused by an accident or illness. Generally, the longer the benefit period, the higher your premiums (i.e. annual payments) will be. Injuries or sickness as a result of your employment may also be covered by worker’s compensation.

What Types of Disability Insurance Policies Are There?

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

  • Non-cancelable policies: Premiums are fixed over the term of the policy. The insurer cannot suddenly increase your rates, decrease your benefits, cancel or refuse to renew your policy.
  • Guaranteed renewable policies: Premiums can be raised as long as the change affects an entire category of occupations, policyholders, etc.
  • Conditionally renewable policies: Premiums can increase and your coverage can be cancelled in the event certain conditions stated in the policy are triggered.

How Can I Obtain Disability Insurance?

There many different kinds of disability benefit contracts. Some plans are available from your employer through its group health package and from private insurers. There are also various public sector programs including Social Security and some State Disability Insurance programs. Veterans, members of the armed forces, federal civil servants and coal miners are also covered by federally-sponsored programs.

Do I Need an Attorney to Help with My Disability Insurance Case?

Given the complexity of the legal issues involved and the tendency of insurance companies to vigorously defend claim denials, employees should retain an attorney experienced in insurance claims and bad faith litigation to evaluate potential legal claims. If you cannot afford an attorney, you may request that one takes your case on a contingency fee basis. Cases against disability insurers are frequently undertaken on a contingency fee basis where the attorney investigates and evaluates the case before filing a complaint, advances the costs of investigation and litigation, and is paid attorney fees only if there is a recovery.