Disability benefits

Scope

Employees who cannot work due to a disability might be eligible to receive benefits.

Regulatory citations

• None

Key definitions

• None

Summary of requirements

There are two major types of disability insurance: short-term and long-term.

• Short-term disability provides an income for the early part of a disability. A policy may pay benefits for two weeks up to two years.
• Long-term disability helps replace income for an extended period of time, usually ending after five years or when the disabled person turns 65. Some people have disability insurance provided by their employers; others may choose to purchase it individually.

Disability insurance policies can cover individuals own occupation or any occupation. “Own occupation” policies protect individuals who are unable to perform the substantial and major duties of their specific job. In contrast, an “any occupation” policy provides disability payments only if an individual is incapable of performing work of any kind.

When researching disability insurance benefits it is best to talk to several insurance companies. Here are some good questions to ask about disability policies:

• What is the definition of disability in your policy?
• How long will the benefits continue?
• How much is the benefit amount?
• Will it adjust for inflation?
• Is there a waiting period?
• Is the amount affected by Social Security, workers’ compensation, or other benefits?
• Are partial benefits available if an employee is released for light duty or part time work?
• What are the exclusions in the policy?
• Is the issuing company strong financially?
• Does the plan include rehabilitation and return to work incentives?

Workers’ compensation. Five states and one Commonwealth offer employer funded disability insurance programs for workers with non-work related injuries and illnesses. These are California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico. Workers’ compensation provides disability insurance for work-related injuries and illnesses in all states.

Social Security Disability Insurance. The Social Security and Supplemental Security Income disability programs are the largest of several Federal programs that provide assistance to people with disabilities. While these two programs are different in many ways, both are administered by the Social Security Administration and only individuals who have a disability and meet medical criteria may qualify for benefits under either program. Social Security Disability Insurance pays benefits to individuals and certain members of their family if they worked long enough and paid Social Security taxes. Supplemental Security Income pays benefits based on financial need.

ERISA. Your company’s disability insurance benefits may be covered under the Employee Retirement Income Security Act (ERISA).