Disability insurance is an agreement between an insurer and an individual that requires the insurer to pay out a monthly cash benefit to supplement wages lost due to an individual’s disability in exchange for a monthly premium. That’s why it’s often referred to as disability income insurance.

The Family and Medical Leave Act (FMLA) only provides 12 weeks of unpaid, job-protected leave per year to employees who have worked for a covered employer for at least 12 consecutive months. “Covered employer” refers to any private organization with at least 50 employees, government agencies, or public schools. To be clear, even if an individual qualifies for FMLA leave, their employer is not required to pay them for that time off.

On the other hand, some government programs—such as Social Security and workers’ comp—pay out cash benefits to certain employees with a qualifying disability. 

Even with these protections in place, there are still many disabled individuals unable to work who do not qualify or need more coverage. 

That’s why many employees should consider electing disability insurance through their employer, who can often obtain lower premiums through group coverage.

Premiums are typically deducted from an employee’s paycheck and can vary based on age, income, and occupation. For example, an older individual in a higher risk industry will pay higher premiums than a younger individual in a lower risk industry. The cash benefit of a disability policy is based on an employee’s income—usually 45% to 65%.

Disability policies also have waiting periods—also called elimination periods—which vary by policy. This means the policy will not begin to pay out until a set amount of time has passed since the onset of illness or injury.

Related Terms: Disability Leave