Short-term vs. long-term disability insurance
The two types solve different problems. Short-term disability covers a few weeks or months, such as recovery from surgery or a difficult pregnancy. Long-term disability covers the scenario that does real financial damage: years without a paycheck.
| Feature | Short-term disability | Long-term disability |
|---|---|---|
| Typical benefit length | Usually no more than six months | 2, 5 or 10 years, or to age 65–67 or retirement |
| Waiting (elimination) period | A few days to a couple of weeks | Commonly 90 days; options run from 30 days to two years |
| Share of income replaced | Varies by plan | Typically 40%–65% of pre-tax earnings |
| Who usually provides it | Employers (44% of private-industry workers have access) | Employers (37% have access) or an individual policy |
Source: Bureau of Labor Statistics, Employee Benefits in the United States, March 2026; Life Happens; MoneyCrashers insurer summaries (updated Jan. 2026).
The BLS numbers show the gap. Fewer than four in ten private-sector workers can even get long-term disability coverage through work. If you're self-employed, a contractor or work for a small firm, an individual policy may be the only option.
The policy terms that decide what you get
Definition of disability: own-occupation vs. any-occupation
This is the most important line in the contract. It decides whether a claim gets paid.
- Own-occupation: You're disabled if you can't do the main duties of your own job, even if you could do other work. A surgeon with a hand tremor could collect benefits while teaching. Guardian's Berkshire Life policies have used a "true own-occupation" definition, which is popular with doctors and dentists.
- Any-occupation: You're disabled only if you can't do any job reasonably suited to your education, training and experience. This is harder to qualify for and cheaper to buy. Assurity, for example, uses an any-occupation definition.
- Split definitions: Group plans often use own-occupation for the first 24 months and then switch to any-occupation, as in MetLife's sample plan. Read where that switch happens.
Benefit amount
Insurers won't replace 100% of income, because they want you to have a reason to return to work. Individual policies commonly cap benefits at 60%–65% of earnings. MassMutual, for example, lets you choose 45%–65% of pre-disability income. Principal's individual policies go up to $20,000 a month, and Mutual of Omaha's to $12,000, according to MoneyCrashers' January 2026 summary.
Elimination period
This is the waiting time between the start of your disability and the first payment. It works like a deductible measured in days. A 90-day elimination period is common for long-term coverage. Choosing 180 days lowers the premium but means you need savings to cover six months. Your emergency fund and any short-term coverage should be sized to bridge that gap.
Benefit period
This is how long payments last once they start. A two-year benefit period is much cheaper than coverage to age 65, but a serious back injury, cancer or a mental-health condition can easily last longer than two years. If you're buying one policy, the benefit period is usually not the place to economize.
Renewability and riders
A non-cancelable policy locks your premium and terms as long as you pay. A guaranteed renewable policy can't be cancelled, but the insurer can raise rates for a whole class of policyholders. Common riders include:
- Partial or residual disability: pays a reduced benefit if you return to work part-time or earn less.
- Cost-of-living adjustment: raises benefits during a long claim so inflation doesn't erode them.
- Future increase option: lets you buy more coverage as your income rises without new medical underwriting.
- Retirement or student loan protection: MassMutual offers a retirement savings protection rider; Guardian and Ameritas have offered student loan riders.
Each rider adds cost. Add the ones that match a real risk, not every option on the menu.
What disability insurance costs
Life Happens, a nonprofit insurance education group, puts long-term disability insurance at about 1% to 3% of your annual salary.
| Annual salary | Typical yearly premium | Typical monthly premium |
|---|---|---|
| $50,000 | $500–$1,500 | $60–$125 |
| $100,000 | $1,000–$3,000 | $83–$250 |
| $150,000 | $1,500–$4,500 | $125–$375 |
Source: Life Happens, "How much does disability insurance cost?" (figures based on Policygenius data); the $150,000 row is our own calculation at 1%–3%. Actual quotes vary.
Where you land in that range depends on your age, health, occupation, risky hobbies and sex, plus the choices you make: benefit amount, elimination period, benefit period, the disability definition and riders. An office worker pays less than a roofer. Own-occupation coverage to age 65 with a cost-of-living rider sits at the top of the range.
Group coverage vs. an individual policy
An employer plan is often cheap or free, and it's usually guaranteed issue, with no medical questions. But it has limits:
- It usually ends when you leave the job.
- The definition of disability is often any-occupation after two years.
- Benefits are usually reduced by government benefits you receive, such as Social Security disability (an "offset").
- Benefits are capped at a monthly dollar amount. MetLife's sample plan pays 40% of salary up to $6,000 a month, which leaves high earners well short.
An individual policy is underwritten on your health and job, so it costs more. But it's yours to keep when you change employers, and you choose the definition and riders. Principal, for example, highlights that its individual policies stay in force when you switch jobs. Many people combine the two: the group plan as a base, plus an individual policy to fill the gap.
The tax difference
Who pays the premium decides whether benefits are taxed. Under IRS guidance:
| How premiums are paid | Are benefits taxable? |
|---|---|
| Employer pays the whole premium | Yes |
| You pay through a pretax cafeteria plan | Yes, fully (treated as employer-paid) |
| You pay with after-tax money | No |
| Employer and you split the cost (your share after-tax) | Only the part tied to the employer's payments |
Source: IRS, "Life insurance & disability insurance proceeds" FAQ.
Here's what that means in practice. Say you earn $80,000 and your employer plan pays 60%, or $4,000 a month. If your employer pays the premium, that $4,000 is taxable income, so you may keep noticeably less. If you pay for an individual policy with after-tax dollars, a $4,000 benefit arrives tax-free. When comparing a group plan with an individual quote, compare after-tax benefits.
Social Security Disability Insurance: the baseline
If you've worked and paid Social Security taxes long enough, you may qualify for SSDI. Treat it as a floor, because the bar is high.
- Strict definition: You must be unable to do your past work or any other work in the national economy. The condition must be expected to last at least 12 months or result in death.
- Earnings test: In 2026, earning more than $1,690 a month ($2,830 if you're blind) generally counts as substantial gainful activity and rules you out.
- Five-month wait: Benefits don't start until after five full calendar months of disability.
- Modest benefits: The average disabled-worker benefit is $1,630 a month after the 2.8% COLA for 2026. A disabled worker with a spouse and children averages $2,937.
Many group long-term disability plans reduce their payment by the amount of SSDI you receive. Check your plan's "offset" language.
Insurers that sell individual disability coverage
The companies below are well-known individual disability insurers. The ratings are AM Best financial strength ratings as reported in published sources, not our scores. This is not a ranking. Products, limits and availability vary by state and occupation class.
| Insurer | AM Best rating | Notable published features |
|---|---|---|
| Guardian (Berkshire Life) | A++ (affirmed Sept. 2025) | True own-occupation definition; long list of riders; sold through brokers and employers |
| MassMutual | A++ | Benefit of 45%–65% of income; retirement savings protection rider; sold through agents |
| Principal | A+ | Individual benefits up to $20,000/month; portable between jobs |
| Mutual of Omaha | A+ | Up to $12,000/month; may continue to age 75 if still working full-time |
| Ameritas | A | Monthly income plans with riders; lump-sum plan for disabilities over 12 months |
| Assurity | A- | Any-occupation definition; benefit periods from 1 year to retirement age; possible no-exam coverage at $4,000/month income or less |
Source: AM Best announcement via Business Wire (Sept. 12, 2025) for Guardian; MoneyCrashers, "Best Disability Insurance Companies" (updated Jan. 20, 2026) for other ratings and features.
Some newer online sellers, such as Breeze, offer instant decisions for some applicants. That speed suits people in low-risk jobs who want a simple policy. Specialist brokers who work with several insurers can compare own-occupation quotes for high earners and medical professionals.
How to decide what to buy
- Check what you already have. Get your employer's plan summary. Note the benefit percentage, monthly cap, definition of disability, benefit period and whether premiums are employer-paid.
- Work out your monthly gap. Compare your after-tax take-home pay with the after-tax benefit. Count fixed costs such as housing, insurance and debt payments.
- Pick the definition first, then the price. Specialized workers have the most to gain from own-occupation coverage. If you'd realistically switch jobs after an injury, any-occupation may be enough.
- Match the elimination period to your savings. Three months of expenses saved supports a 90-day wait.
- Get quotes from more than one insurer. Ask each for the same benefit, definition, elimination period and benefit period, so you're comparing like with like.
- Read the exclusions. Look for pre-existing condition clauses and limits on mental-health conditions. Group plans commonly cap those benefits at 24 months.
Disability coverage is one piece of income protection. Your family may also need life insurance, and a long illness usually means big medical bills, so review your health insurance deductible too. For more background, see our disability insurance basics guide.
Frequently asked questions
How much of my income will disability insurance replace?
Long-term policies typically replace 40% to 65% of pre-tax earnings, according to Life Happens. Insurers cap benefits below your full pay. MassMutual, for example, lets you choose 45% to 65%.
How much does disability insurance cost?
Long-term disability insurance usually costs about 1% to 3% of your annual salary. On a $100,000 salary, that's roughly $1,000 to $3,000 a year. Your age, health, job, benefit period, elimination period and riders all affect the price.
Are disability insurance benefits taxable?
It depends on who paid the premiums. Benefits are taxable if your employer paid or you paid pretax through a cafeteria plan. They're tax-free if you paid the premiums with after-tax money. If costs were shared, only the part tied to the employer's payments is taxable.
What is the difference between own-occupation and any-occupation coverage?
Own-occupation pays if you can't do the main duties of your own job, even if you could work elsewhere. Any-occupation pays only if you can't do any job suited to your education and experience. Own-occupation costs more but is easier to claim on.
Isn't Social Security disability enough?
For most people, no. SSDI requires that you can't do any substantial work, has a five-month waiting period, and averaged $1,630 a month for disabled workers in 2026. In 2026, earning over $1,690 a month generally makes you ineligible.
Should I keep my employer's disability plan if I buy my own policy?
Many people do. The group plan is often cheap or free. An individual policy can fill the gap above the group plan's cap, and it stays with you if you leave your job. Check how the two policies coordinate benefits before you buy.
Sources
- Social Security Administration – 2026 COLA Fact Sheet
- IRS – Life insurance & disability insurance proceeds (FAQ)
- Bureau of Labor Statistics – Employee Benefits in the United States, March 2026
- Congressional Research Service – SSDI: The Five-Month Waiting Period for Benefits
- Life Happens – How much does disability insurance cost?
- Business Wire – AM Best Affirms Credit Ratings of Guardian Life Insurance Company of America
- MoneyCrashers – 7 Best Disability Insurance Companies
- MetLife – Reading your LTD Schedule of Benefits
- Policygenius – Guardian/Berkshire disability insurance review
Rates, fees and terms change often. Figures were checked in October 2026; confirm current details with the provider before you apply.