What Is Supplemental Disability Insurance?

Millions of Americans are unable to work each year because of illnesses or injuries. While you hope you are never a part of that statistic, you should review your insurance coverage to make sure you would have income while out of work. After reviewing, some people start to look for answers to the question: What is supplemental disability insurance? Here’s how this added coverage offers greater financial security on top of your employer’s supplemental insurance plan.

Understanding Supplemental Disability Insurance

Supplemental disability insurance helps offer additional insurance coverage. It doesn’t replace or void the policy you have through your employer, but it can make it possible for you to get a larger percentage of your salary while you’re out of work.

Most employers offer disability insurance that provides 40% to 60% of an individual’s salary when they are away because of illness or injury. And while that income can help you stay financially sound while away from work, it might not be enough, especially if you’re the primary earner in your household. 

If you face a long-term, qualifying disability, you might be able to get Social Security disability. But the process to apply is lengthy and could leave you without adequate income for many months or even years. 

That’s where supplemental disability insurance comes in. It offers expanded coverage over what you have through your employer. You can get up to an additional 40% income replacement so you can live with amounts close to your salary during your time away. 

As the name indicates, you’ll get this insurance on your own. It is not through your employer. The other perk of such coverage is that you’ll have it as you move from job to job, which offers greater peace of mind.

Types of Supplemental Disability Policies

Two types of this insurance are available: short-term and long-term. Each type has its use cases and benefits. Here’s how each works so you can evaluate whether it might be right for you.

Supplemental Short-Term Disability Insurance

Once you purchase this insurance, you’ll pay a monthly premium to retain coverage. If you suffer an illness or injury that prevents you from working, you’ll submit a claim to the insurance company to begin receiving payouts. Some key aspects of short-term coverage you should be aware of include:

• Waiting period: All plans have one, but they can vary greatly from seven to 30 days. During this time, you won’t receive payouts. Once you’ve completed the waiting period, your coverage goes into effect.
• Benefit time frame: Most short-term plans only last six or 12 months. Review your plan carefully to ensure you’ll have the coverage you need.
• Wage replacement: This insurance generally offers 40% to 60% of your lost wages. Ideally, you also have an employer plan to help cover the rest.

Supplemental Long-Term Disability Insurance

Long-term disability insurance works a great deal like short-term where you pay premiums and submit documentation when you need to use the insurance. But there are some plan nuances you should know about that are unique to long-term coverage.

• Waiting period: The waiting period for long-term coverage is often longer, averaging 90 days. Your specific plan might have a shorter or longer waiting period. Ensure you know what that is before purchasing the insurance.
• Coverage period: Some plans only last two years. Others will cover you until you retire. While shorter plans will cost less in premiums each year, they also won’t offer the security and peace of mind a plan that offers coverage until retirement does.
• Wage replacement: Most plans offer 60% to 80% of your lost wages for the duration of the coverage.

What Does Supplemental Disability Insurance Cover?

Here’s a look at some common scenarios when workers call upon their supplemental disability insurance. 

• Extended time away from work because of injury or illness
• Injuries resulting from accidents
• Pregnancy ailments that prevent you from working
• Maternity leave
• Cancer treatment and long-term disabilities from the ailment
• Heart problems that prevent you from working
• Any other covered condition that a physician certifies you as unable to work

What Is Not Covered?

Learn scenarios when you would not be able to use this insurance coverage.

• International, self-inflicted injuries
• War or acts of war
• Preexisting conditions or medical injuries from treating a preexisting condition

When Should You Get a Supplemental Disability Policy?

Who needs this coverage and when should they buy it? Here’s a look at the ideal times to consider purchasing supplemental disability insurance.

• When you start working: While you’re likely young and healthy, that doesn’t mean you are not at risk of missing work because of injury or illness. During working years, 1-in-4 workers will become disabled before retirement age.
• For job hoppers: When you move from job to job, it can take a few months for insurance coverage to start. And not all employers offer disability insurance. For peace of mind that you’ll have the income replacement you need no matter where you’re working, consider supplemental disability insurance.
• People who need more coverage than their employer offers: Some people need more coverage than the standard 40% to 60% their employer offers. Plus, that coverage might be taxable if your employer is paying for it. Alternatively, your employer might only offer short-term coverage and you want to know you’re fully covered so you add long-term to the mix.
• Stay-at-home parents: While you don’t bring in cash directly, you save your family money with the chores and childcare you provide. Knowing that you could pay someone else to complete that work in case you are disabled can offer immense peace of mind and could be life-changing if you end up using the coverage.

How Much Does Supplemental Disability Insurance Cost?

You should expect to pay 1% to 3% of your annual gross salary on a disability insurance plan. Your specific rate will be impacted by:

• The amount of coverage you select
• Age
• Gender
• Overall health
• Occupation

If you make $70,000 per year, you can expect to pay $700 to $2,100 in coverage. Or if you make $100,000 per year, you can expect to get quotes for $1,000 to $3,000 per year for coverage.

Pros and Cons of Supplemental Disability Insurance

As you weigh whether to purchase this additional insurance, consider these pros and cons and how they might apply to your financial situation.

Pros

• Protects your income and earning abilities
• If you’re sick or injured, you can focus fully on recovering without worrying about finances
• Enables you to keep up with your financial obligations to protect your assets, such as your home or car
• Aids in avoiding major financial issues, like acquiring massive debt or filing for bankruptcy

Cons

• One more premium to pay
• May have to complete a physical exam to secure coverage
• Waiting period where you won’t have coverage
• Complex and long application process to secure coverage

How to Get Supplemental Disability Insurance

Learn how to purchase a supplemental disability insurance policy. Follow these step-by-step directions to protect your income and ensure that no matter where you work or when you started there, you’ll have the coverage you need to care for your family.

• Calculate how much coverage you need by adding up your necessary expenses and evaluating how much income you’ll have from other sources, if any, should you become sick or injured.
• Get quotes from various companies to find a policy that is affordable for you with the terms you prefer.
• Complete the application. You’ll need to input information about your job, income, details on policies you currently have, your age, gender and health history.
• Complete a phone interview where the company will ask more in-depth questions about your lifestyle and health history.
• Some plans will then require that you complete a medical exam. These are most often required for higher coverage amounts.
• Accept your policy and sign the necessary paperwork to bind coverage.

Compare the Best Supplemental Disability Insurance From Benzinga’s Top Providers

Review this list of leading supplemental disability insurance companies to find one that will work best for your needs and get the best rates.

Added Peace of Mind, Even When You Change Jobs

Integrating a supplemental disability insurance plan into your insurance coverage can provide added peace of mind that you’ll have necessary coverage no matter what happens. You can protect your greatest asset — your ability to work and earn an income — to prepare for anything.

Frequently Asked Questions