Disability insurance protects your income if an injury or illness prevents you from working. It’s one of the most overlooked types of insurance—yet for many people, it’s the most important. Your ability to earn income is your biggest financial asset, and disability coverage helps keep your life stable if something unexpected happens.
Before you buy a disability policy, it’s essential to understand how it works and what questions to ask. This guide walks you through the key questions that ensure you choose the right coverage and avoid common gaps that could leave you financially vulnerable.
1. What Type of Disability Insurance Is This—Short-Term or Long-Term?
Disability insurance typically comes in two forms:
Short-term disability (STD):
Covers disabilities lasting a few weeks to several months.
Long-term disability (LTD):
Covers disabilities lasting several months, years, or even until retirement age.
Ask:
- Which type is this policy?
- How long do benefits last?
- Does it coordinate with any employer-provided coverage?
Your long-term earning ability is what needs the most protection.
2. How Is “Disability” Defined in This Policy?
The definition of disability is one of the most important parts of your policy.
Ask:
- Is this an “own occupation” or “any occupation” policy?
- Will I qualify for benefits if I can’t perform my current job but could perform another?
- Does the definition change after a certain number of years?
Own-occupation policies are generally stronger because they protect your ability to work in your specific profession, not just any job.
3. What Is the Elimination Period?
The elimination period is how long you must wait before benefits begin.
Common elimination periods: 30, 60, 90, 180 days.
Ask:
- What is the elimination period on this policy?
- Can I choose a longer elimination period to lower the premium?
- Does the elimination period apply separately to each new claim?
Your savings and emergency fund should influence this decision.
4. How Much of My Income Will the Policy Replace?
Disability insurance usually covers 50–70% of your income.
Ask:
- What percentage of my income is covered?
- Does the benefit cap limit my coverage?
- Does it cover commissions, bonuses, or self-employment income?
The goal is to maintain financial stability during recovery.
5. Are the Benefits Taxable?
Whether benefits are taxed depends on how premiums are paid.
Ask:
- Are my disability benefits taxable?
- If my employer pays the premium, does that affect taxes?
- How will taxes affect my take-home benefit?
Taxation can significantly reduce your actual benefit amount.
6. Does the Policy Include Partial or Residual Disability Benefits?
Not all disabilities prevent you from working entirely.
Ask:
- Does this policy pay benefits if I can work part-time?
- How does the policy calculate income loss for partial disability?
- Are residual benefits included or optional?
Residual disability benefits help replace income when you are partially disabled, which is extremely valuable for many professions.
7. Are There Exclusions or Limitations I Should Know About?
Every policy has exclusions.
Common exclusions include:
- Pre-existing conditions
- Mental health limitations
- Self-inflicted injuries
- High-risk activities
Ask:
- What conditions are excluded from the policy?
- Are there limitations on mental health or musculoskeletal conditions?
- Are pre-existing conditions covered after a waiting period?
Understanding exclusions prevents denied claims later.
8. What Optional Riders Are Available?
Riders enhance and customize your disability coverage.
Ask about:
- Cost-of-living adjustment (COLA)
- Future increase option
- Own-occupation rider
- Catastrophic disability rider
- Student loan repayment rider
- Retirement protection rider
Riders add protection, especially for young professionals or high-income earners.
9. Is There a Benefit Integration With Social Security or Workers’ Compensation?
Some policies reduce your benefit if you receive other income.
Ask:
- Will my disability benefits decrease if I receive Social Security Disability Insurance (SSDI)?
- Do workers’ compensation benefits offset my disability payout?
- How does the insurer calculate these offsets?
This helps you understand your true benefit amount.
10. Does the Policy Cover Mental Health or Stress-Related Disabilities?
Mental health disabilities are among the most common reasons for work absence.
Ask:
- Does the policy include mental and nervous disorders?
- Are these benefits limited to 12 or 24 months?
- Are stress-related conditions covered?
Mental health limitations vary widely by insurer.
11. What Is the Renewal Type—Non-Cancelable or Guaranteed Renewable?
Your renewal type affects your long-term financial security.
Ask:
- Is this policy non-cancelable?
- Is it guaranteed renewable?
- Can premiums increase over time?
Best protection: Non-cancelable and guaranteed renewable, meaning your rates and benefits cannot change as long as you pay your premiums.
12. Does the Policy Require Medical Underwriting?
Most private disability policies require underwriting.
Ask:
- Will I need a medical exam?
- What health factors influence my premium?
- Are there simplified or no-exam options?
Underwriting can be stricter for disability insurance than for life insurance.
13. How Long Will Benefits Last?
Benefit duration dramatically impacts cost and coverage.
Ask:
- Does the policy pay until age 65, 67, or 70?
- Are shorter benefit periods available?
- Does the policy end if I return to partial work?
Longer benefit periods generally offer the best protection.
14. How Stable Is the Insurance Provider?
Since disability claims can last years, financial stability matters.
Ask:
- What are the insurer’s financial ratings (AM Best, Moody’s, etc.)?
- Has the company historically increased premiums?
- How long does the insurer typically take to pay claims?
A reliable insurer matters more in disability coverage than almost any other type.
15. How Does the Claims Process Work?
Understanding the claims process helps you prepare for stressful situations.
Ask:
- How do I file a disability claim?
- What documentation is required?
- How long does it take to receive a decision?
- How often must I provide updates during disability?
A smooth claims process is crucial during a sudden life change.
Final Thoughts
Disability insurance protects your greatest financial resource—your ability to earn an income. Asking the right questions before buying a policy ensures you get the coverage you need, understand how benefits work, and avoid costly surprises when you need support the most.
Smart professionals don’t just buy disability insurance—they ask the right questions first.