Disability insurance is one of the most misunderstood insurance products on the market today, which is why so few people who need this coverage actually have it. However, choosing a disability insurance policy could be the most important decision you can make for your family. Why? Because disability insurance protects your ability to earn income if you can not work due to injury or even permanent disability.
When can a disability insurance policy pay off? Let’s go through a hypothetical situation.
Real Life Story
A neurosurgeon in his late 30’s just out of residency with 2 young children, medical school debt and millions of dollars in earning potential had a stroke and will never perform surgery again. His family is protected because he got the right policy from a top-rated insurer.
Table of Contents
- Start your quote with these recommended insurers
- Why You May Need Disability Insurance
- Most Important Factors When Purchasing Disability Insurance
- The Best Disability Insurance Companies of 2021
- How We Found the Best Disability Insurance Providers of 2021
- How Much Disability Coverage Do I Need?
- Long-Term vs. Short-Term Disability Insurance
- Other Ways to Get Disability Coverage
- Summary: Best Disability Insurance Companies of 2021
Start your quote with these recommended insurers
Why You May Need Disability Insurance
When you’re relatively young or healthy, it’s easy to believe you don’t need any amount of disability coverage. You’re practically invincible, right? Unfortunately, this kind of thinking leaves millions of Americans in financial peril year after year, mostly because they do not have any sort of safety net when a major illness or injury occurs.
To be clear, not having disability insurance can lead to catastrophic consequences for your family if you find yourself unable to work. Without a paycheck coming in, it’s likely you would struggle to pay bills and keep food on the table, and you could even lose your home. If you had a spouse or partner, they could be designated as the sole provider for your household going forward, which may or may not be realistic at all.
Unfortunately, disability occurs more often than one might think. According to the Council for Disability Awareness, more than 25 percent of today’s 20-year-olds can expect to be unable to work for at least one year due to an injury or illness before they reach retirement age. Further, 5.6 percent of American workers will have some sort of short-term disability in any given year, with almost all of the most common situations being “non-occupational” in origin.
In fact, the most common situations that lead to short spurts off of work or even long-term disability include pregnancy (25%), musculoskeletal disorders (20%), digestive disorders (7.8%), mental health issues including depression and anxiety (7.7%), and injuries such as fractures, sprains, and strains of muscles and ligaments (7.5%).
While a considerable percentage of workers do have some disability coverage through their employer, it’s not as many as one might think. Bureau of Labor Statistics figures show that only 42 percent of workers had short-term disability coverage through private employers in 2018, compared to just 26 percent of workers employed with state or local governments. In terms of long-term disability coverage, 34 percent of workers within private industry had coverage through work, compared to 38 percent of those employed through state and local governments.
The reality is, most people are not insured against short-term or long-term disability at all, or at least drastically underinsured. Recent reports show that at least 51 million working adults don’t have any disability coverage other than the potential to qualify for Social Security. And we all know that most Americans don’t have enough savings to cover their bills if they suddenly lost access to their income.
Most Important Factors When Purchasing Disability Insurance
Where short-term disability coverage is typically offered through an employer and usually only lasts for 3 to 6 months or up to one year, long-term disability coverage can last for anywhere from two years to retirement age.
Another type of disability insurance called mortgage disability insurance, or mortgage payment protection insurance, kicks in to cover your mortgage payments if you cannot work due to an injury or disability.
Supplemental disability insurance is a type of coverage you can buy to fill the gap between your employer’s disability coverage and your true financial needs. Supplemental disability policies you’ve probably heard of include those from Aflac.
Before you shop for a disability policy, make sure you understand what kind of coverage you already have through an employer (if any). If your employer offers robust short-term and long-term disability coverage, you may only need a supplemental policy or mortgage disability insurance.
The Best Disability Insurance Companies of 2021
Each of the companies on this list is respected and highly rated by the major ranking agencies, meaning you can count on them to pay out your disability policy as promised. If you’re in the market for disability coverage, you should start your search here.
- Guardian Life
- Illinois Mutual
- PIU (Petersen International Underwriters)
- Mutual of Omaha
- Ohio National
- Principal Financial Group
- The Standard
Breeze is an online disability insurance firm that aims to make long-term disability coverage attainable and affordable. You can apply online in less than 15 minutes, and this company promises no paperwork, no pain, and no pressure throughout the process.
Long-term disability policies are available for individuals ages 18 to 60, and waiting periods between 30 days and one year can apply. You can also purchase coverage worth $500 to $20,000, and your policy is guaranteed renewable until ages 65 or 67.
Why This Company Made Our List: Built-in features of disability policies from Breeze include partial disability, presumptive disability, home modification, a survivor benefit, vocational rehab, and an organ donor benefit. You can also add riders for catastrophic disability, guaranteed insurability, critical illness, and more.
Assurity is one of the most popular choices for disability insurance. This company offers a couple of different choices for disability insurance, including options that can protect you for the short-term or the long-term if you were suddenly injured or disabled and unable to work. Assurity has also been in business for more than 120 years, so this company has a long and proven history of fulfilling its obligations.
Why This Company Made the List: One reason Assurity stands out from the competition is due to their disability insurance options for self-employed applicants. If you own your business or you’re self-employed, then Assurity is an excellent company to start your search with.
You can purchase a plan that provides affordable monthly coverage and flexibility in terms of how you receive benefits. Some of their disability policies will even pay out when you’re unable to work in your old job for up to two years, but you’re still able to work another job elsewhere.
Guardian Life is no small operation. They have over 2,750 agents and 58 agencies across the nation. Before you begin shopping for disability coverage, you should know the disability insurance plans are actually offered by one of their subsidiaries, Berkshire Life Insurance Company of America. Berkshire Life has four kinds of disability policies: individual plans, group plans, disability insurance for business owners, and supplemental plans.
Why This Company Made the List: Guardian was established in 1860, and they have the best rating from both A.M. Best and the BBB. Not only do they have great ratings, but they are also a Fortune 250 global financial services company.
It’s possible you haven’t heard of Illinois Mutual before, but you need to include them in your search for disability coverage. As you can guess from the name, they were established in Peoria, Illinois over 100 years ago. These days, Illinois Mutual has over 1,000 independent insurance agents across the country.
Why This Company Made Our List: Their Paycheck Power disability insurance policy can help pay for your monthly expenses if Social Security isn’t enough. Like most other plans, their policy is guaranteed renewable until you turn 67. As long as you’re paying the premiums, they can’t cancel your policy.
Further, this company’s Business Expense Power plan gives disability insurance coverage to company owners. If something were to happen to you, would your business shut down? This plan will give the company the money to pay for any business expenses to get the doors open and make sure everything is running smoothly.
PIU (Petersen International Underwriters)
Petersen International Underwriters is probably the least well-known company on our list, but you shouldn’t overlook them for disability insurance. Despite their lack of name recognition nationwide, PIU has a noble history as well as an A+ rating with the Better Business Bureau (BBB).
Why This Company Made Our List: PIU excels in providing disability insurance for high-income earners, meaning they specialize in working with clients who would lose a lot of income if they could no longer work. Another category where PIU shines is with clients who already have a health condition when they apply. Sure, the rates may not be the lowest, but PIU gives disability policies where other companies won’t.
MassMutual is not new to the insurance market, and in fact has been in operation since 1851. Not only have they been around for well over 100 years, but they also have quality ratings including an A+ from both A.M. Best and from the BBB.
Basics of their coverage include elimination periods from 60 days to 730 days, benefit periods from 2 years to 10 years, and a maximum age of 70. This company also defines disability as relating to your own occupation, meaning you are too injured to do your job, not just any job. With MassMutual, you can get a True Own Occupation rider which changes the qualifications for paying out the plan.
Why This Company Made Our List: A unique factor of MassMutual plans is the recurring disability feature. If you end up with a new disability which is related to a previous claim, the elimination period is waived.
Mutual of Omaha
Mutual of Omaha has been featured on Good Financial Cents several times, and with good reason. What makes Mutual of Omaha so special? For the most part, this company stands out due to their additional benefits and riders.
Why This Company Made Our List: Mutual of Omaha has a handful of different benefits built-in to their plans and others you can add on to your policy if you want more coverage. Their long-term disability insurance policies have a total disability income benefit, a waiver of premium rider, a proportionate disability benefit, and they are guaranteed renewable until you turn 67.
After 67, you can still get coverage up until the age of 75 if you’re still working full-time. These are only a few of the built-in features, but there are plenty of others including a terminal illness benefit, a rehabilitation benefit, a survivor benefit, and more. You can also add riders for cost of living, critical illness, and return of premium. If you’re looking for a company which has a customizable plan, Mutual of Omaha is an excellent option.
Ohio National receives excellent rankings from third party agencies, including an A+ rating from A.M. Best, the BBB, and the S&P. It’s comforting to know these third-party rating companies have deemed Ohio National a financially safe provider.
Let’s look at Ohio National’s ContinuOn Income Solutions policy, a long-term disability insurance policy available to anyone from the ages of 18-70. This policy is non-cancelable and guaranteed renewable. They have elimination periods anywhere from 60 days to 365 days and minimum income benefits of up to $30,000.
Why This Company Made Our List: In addition to the basic income protection, their plan also has some additional benefits like a residual rider, which can payout a portion of the policy if you can still work but have a loss of income. They also have a Hospice care benefit, and if the policyholder is disabled, the elimination period is waived if they receive hospice benefits.
Principal Financial Group
Principal’s history goes all the way back to 1879, which means this company has been around for a long time. They have received a handful of awards in their long history, including the Adviser’s Choice Award for advisor support.
Principal’s Individual disability income insurance is available as both an individual plan and as an employee benefit. One unique feature of these policies is they are available to workers who work at least 20 hours, which is less restrictive than some competing companies offer.
Why This Company Made Our List: With Principal, you get simplified underwriting for up to $6,000 per month. If you want to secure more protection than that, you’ll have to go through the full underwriting. Every applicant is different, and each person is going to receive different rates, but Principal gives some enticing sample quotes for a $1,000 a month policy. If you’re a 40-year-old male looking to buy the policy, you’re going to pay around $25 a month.
A woman of the same age and health is going to pay close to $40. These are excellent rates for this amount of protection.
If you’re looking for options, The Standard has you covered. This disability insurance provider boasts several choices for you to pick from, although their primary option for individual disability insurance is Platinum Advantage.
One thing which makes this policy stand out from the crowd is the no-cost riders and benefits, including the Family Care Benefit. If you ever have to take time off of work to care for a family member with a serious illness and lose 20% of your income, you may get a monthly benefit. This is a benefit you won’t find anywhere else.
Why This Company Made Our List: Other riders this company includes for eligible applicants are an automatic increase rider and a benefit increase rider. The automatic increase rider will increase the monthly benefit 4% every year for the first six years.
The benefit increase rider allows you to buy more coverage every three years after buying your plan without having to go through the medical underwriting process again.
Ameritas was originally established in 1887 under a different name, the Old Line Bankers Life Company of Nebraska. They merged with Acacia Life and Union Central Mutual Holding Company of Cincinnati, Ohio. After the two mergers, the company became known as Ameritas.
Ameritas currently sells two types of disability insurance: DInamic Foundation and DInamic Fundamental.
The DInamic Foundation plan has several features built-in to the policy which you can enjoy, including the non-disability injury feature, which will reimburse medical expenses.
Another unique aspect of the plan is the COBRA Premiums benefit, which will reimburse your premiums if you lose health insurance coverage because of your disability.
The other option, the DInamic Fundamental, is similar to the Foundation policy, but it has a simplified underwriting process that makes it easier to get approved quickly. If you want to be eligible for the Fundamental policy, however, you must work at least 30 hours a week in a job that isn’t considered high-risk.
Why This Company Made Our List: Ameritas has excellent third party rankings, including an A+ rating with the BBB, an A rating with A.M. Best, and an A+ rating with Standard & Poor’s.
How We Found the Best Disability Insurance Providers of 2021
The best disability insurance companies have several attributes that help them stand out, including excellent rankings from third-party agencies like the Better Business Bureau, A.M. Best, and Standard & Poor’s. For the purpose of our ranking, we only looked at providers who have solid rankings for financial strength and a long history of business excellence.
While each of the disability companies we profiled offers their own selection of policies with different requirements and features, we gave preference to providers who offer clear, precise descriptions of their policy inclusions online as well as the ability to speak with an insurance professional and ask questions over the phone or via online chat.
We believe that all the disability insurance providers in our ranking offer policies that can protect you in the event of a major disability or injury that prevents you from working and earning a paycheck. Since each company offers different policy inclusions, limits, and plans, however, you’ll want to spend some time comparing all your options and shopping around for disability insurance quotes.
How Much Disability Coverage Do I Need?
The amount of disability coverage you need depends on a number of different factors including your income, your liabilities and bills each month, and how many dependents you have. For the most part, however, you should strive to purchase enough disability coverage so your family can cover your bills in the event you are unable to work and bring in a regular paycheck.
While there is no “right” amount of disability coverage for everyone, most people should try to secure enough coverage to replace at least 50 percent of their income in the event of a long-term disability or injury.
Also keep in mind that you’ll need short-term disability coverage if you don’t have it through work. You can either purchase a short-term disability policy on your own, or you can self-insure by having an adequate emergency fund with at least six months of living expenses set aside.
Before you shop for a disability insurance policy, it can help you make a list of your regular bills and monthly recurring expenses for things like groceries, gas, entertainment, and utilities. You should ensure you purchase enough coverage so that all your major monthly expenditures will be covered, but try to pad your policy with a little extra if you can.
Long-Term vs. Short-Term Disability Insurance
There are two main types of disability insurance you should know about, coverage that lasts for the short-term and long-term disability insurance. You can probably guess the difference based on the names, but you need to know exactly how these plans work before you purchase your own coverage.
For the most part, short-term disability insurance aims to replace your paycheck for the first couple weeks or months after an injury or illness. These policies are usually offered through employers, although you can also purchase your own.
On the other hand, long-term disability insurance is designed to kick in after the short-term insurance policy ends. Long-term plans are there to ensure you have the income to pay for your mortgage, groceries, and other bills if you’re out of work for months or even years. Some long-term disability insurance plans only last for a few years or a decade, whereas others can last until retirement age.
|Short-Term Disability Coverage||Long-Term Disability Coverage|
|Length of Coverage||Usually 3-6 months or one year||2 years, 5 years, 10 years, or to retirement age|
|Coverage Amount||Usually up to 80 percent of gross monthly income||Usually 40 to 60 percent of gross monthly income|
|Average Cost||1% to 3% of annual salary||1% to 3% of annual salary|
|Availability||Receive coverage through an employer, self-insure, or purchase a policy||Receive coverage through an employer or purchase a policy|
Which type of disability insurance do you need? Simply put, you probably need both. We already mentioned how it’s possible to self-insure against short-term disability if you have a large emergency fund, but there’s really no way to self-insure for long-term disability unless you’re independently rich.
If your goal is protecting your family now and later on, I suggest checking to see which policies your employer offers then buying more disability coverage to fill in the gaps.
Other Ways to Get Disability Coverage
While your employer may offer some disability coverage as part of your compensation package, many also let you purchase more disability insurance as a voluntary benefit. In this case, you would likely pay for more disability insurance through payroll deduction, which can be rather convenient. One benefit of buying additional coverage through your employer is the fact that their policies can be cheaper since they purchase insurance coverage at a discounted group rate.
If you belong to a professional association based on your occupation, you may also be able to purchase disability coverage through this affiliation. For example, the American Dentists Association (ADA), the American Bar Association (ABA), and the Financial Planning Association (FPA) all offer optional disability insurance coverage their members can purchase.