Current Coverage

• Before a consumer considers buying disability insurance, she should understand what current coverage is available to her. Worker's Compensation pays benefits to workers injured on the job. Consumers may be eligible for Social Security Disability benefits, but approval often takes some time and the disability must be long-term. Many employers provide some level of disability coverage to all of their employees, but this is often short-term coverage. A consumer should determine what coverage, if any, that her employer offers and the benefits that it provides.
  
  

Short- vs. Long-Term

• Though the exact differences will vary depending on the insurance policy, short-term disability insurance typically pays out for up to six months while long-term disability insurance provides coverage lasting as long as 10 years, or much longer. Another important difference is when the policy begins making payments. Short-term disability typically begins as soon as a consumer exhausts his sick leave, while long-term disability may not kick in until three to six months after the disability occurs.
  
  

Employer-Sponsored Coverage

• Many employers offer optional disability coverage to their employees. As the consumer is buying the insurance through a group policy, the cost of this coverage is often less expensive than buying the insurance privately. Employer plans typically cover 50 to 60 percent of an employee's base income. The consumer eligible for government benefits as a result of the disability will likely see her disability insurance payment amount reduced by the amount of benefits received. Employer-sponsored plans may have restrictive rules on making claims and may not be portable. If a policy is not portable, this means the consumer can only keep the coverage as long as she works for that employer.
  
  

Private Coverage

• Consumers purchase private disability coverage outside of an employer-sponsored plan. The primary problem with private coverage is that it is expensive. Due to the cost, a consumer should determine what the minimum amount of income he needs to survive and buy that amount of coverage. He may buy private coverage that pays out up to 80 percent of his base income, with policies providing less coverage being less expensive. The payouts from some private disability policies may not be reduced by government benefits. Plans that offer inflation protection are more expensive, but the cost may be worth it if a worker suffers a long-term disability. A consumer with employer coverage may buy private coverage as a supplement to coverage from his employer.