Best Disability Insurance of 2023

Disability insurance is divided into two categories: short-term disability (STD) and long-term disability (LTD). Typically, short-term disability insurance pays out benefits for a few weeks or months. This type of insurance policy is most often used for temporary disabilities, such as bone fractures, sprains, simple surgeries, and pregnancies. On the other hand, policyholders receive long-term disability benefits for several years or even up to a certain age, like 65. Extended or permanent disabilities that prevent people from returning to their jobs will be covered by this type of insurance. Some examples are the loss of a limb, eyesight, or hearing, cancer and the long-term effects of its treatment, arthritis, and neurological disorders like Alzheimer's and Parkinson's diseases.

Short-term and long-term disability policies are usually sold separately, and policyholders who purchase both are often able to combine the benefits so that the long-term disability benefits are activated once the short-term benefit period runs out.

Some insurance companies sell accident-only insurance policies, which will only cover accidental injuries, not medical diseases. This type of insurance is popular with people who work in dangerous physical jobs but who feel they are not at risk for non-accidental diseases.

If the disability insurance policy contains a pre-existing condition exclusion, the policyholder will not be able to receive disability benefits if a certain condition causes a disability.

Disability insurance may be purchased by individuals from a private insurance company or through the workplace with a group policy. Group policies are acquired by the company the employee works for. The employee pays a portion of the premium (often through payroll deductions) and the employer pays the rest. Group policies can mean significant savings for the employee, but they are not as customizable as individual policies, under which the policyholder can select the benefit amounts and benefit period they wish, as well as a range of optional insurance riders.

Among the customizable features of a disability insurance policy are the elimination period, the maximum weekly or monthly benefit, and the benefit period.

The elimination period determines the amount of time the policyholder must wait between the day he or she becomes disabled and the day he or she is eligible to begin receiving benefits. This period can range from 30 to 720 days (just under three years). Shorter benefit periods will mean higher insurance premiums, while longer benefit periods will turn into lower premiums. Consumers must aim at striking a balance, since the longer you wait, the longer you will go without disability benefits. Take stock of your savings to see how long you can afford to go without receiving an income.

The maximum weekly or monthly benefit is the highest amount the insurance company will pay. Often, this maximum is is expressed in a percentage, between 50% and 80% of your weekly or monthly income, but some insurance companies state a maximum dollar amount that cannot be exceeded, regardless of the percentage. Weekly maximum is sometimes used for short-term disability policies, while monthly maximum is used for both short-term and long-term policies.

The benefit period is the maximum amount of time policyholders will receive benefits from the insurance company. For short-term disability insurance, this can range from three months to two years, while long-term disability benefits are usually paid out for up to 10 years or up to age 65 or 67, the usual retirement age. Shorter benefit periods will translate into lower insurance premiums. However, consider what your financial situation may be if your disability lasts for years or becomes permanent.

Below, we go over additional features that are often included in disability insurance policies at no additional cost.

In addition to the features that are built into short-term and long-term disability policies, many insurance companies also offer a series of optional riders that add benefits or modify key parts of the base policy. Knowing what each rider does is a key part of customizing your policy so it fits your needs. Keep in mind that many policy riders are not available under group policies, which is one of the reasons they tend to be less expensive than individual policies. Here is a list of the most commonly found disability insurance policy riders:

An insurance company's financial strength is a crucial factor that must be taken into consideration when evaluating and comparing companies. A disability insurance policy can last several years, sometimes several decades, in the case of long-term disability. You want to make sure the company will be able to pay your benefits for the foreseeable future.

One way of determining a company's financial strength is through the score it is given by credit rating companies, such as A.M. Best, Moody's, and Standard & Poor's. These companies take a close look at a company's finances, its creditworthiness, and its obligations to determine how likely it is to be able to pay its policyholders.

While it is important to determine whether a company is financially strong when purchasing a policy, it is equally important to keep tabs on the company's finances throughout the life of the policy, since the company's situation may change.

Another important element when rating disability insurance companies is its reputation and the experience its customers have had. Though it is a highly subjective area of evaluation, it is nevertheless useful to know which issues other customers have had to know whether to stay away from particular companies or to avoid common pitfalls. 

To determine a company’s reputation and customer experience, we have taken a look at customer reviews on the Better Business Bureau and Trustpilot, as well as the company’s complaint ratio and the total number of complaints, as determined by the National Association of Insurance Commissioners (NAIC)’s Closed Consumer Complaints Reports for 2017.