Supplemental Disability Insurance
Regular disability insurance may not make up enough of your typical income if you're out of work due to injury or illness, but supplemental disability insurance can help close the gap.
Written by
Christine Lacagnina has written thousands of insurance-based articles for TrustedChoice.com by authoring consumable, understandable content.
Reviewed by
Cara Carlone is a licensed P&C agent with 20 years of experience. She has her P&C license in RI and TX and holds CPCU, API, and AINS designations.
Providing for a family or even just for yourself can be hard work. Getting seriously injured or ill can also interfere with your typical routine and add a considerable amount to your stress load. Disabilities may leave you unable to perform your previous job tasks and lead to big pay cuts. On top of the medical costs required for your health care, a lower salary can greatly impact your quality of life.
Fortunately, several types of disability insurance and supplemental disability policies are available to help in those exact situations. Independent insurance agents can help you shop and compare supplemental disability insurance plans from multiple carriers to find the right fit. But first, let’s take a closer look at supplemental disability insurance and when and why you might need it.
What Is Supplemental Disability Insurance?
`Supplemental disability insurance is a policy designed to fill in the gaps between your former income and the amount your existing disability insurance pays out if you become disabled. If you get injured or ill, become unable to complete the same job you did before, and suffer a pay cut as a result, your existing disability policy may not be enough to make up the difference in your income.
Save on Disability Income Insurance
Our independent agents shop around to find you the best coverage.
Do I Need Supplemental Disability Insurance?
You might need supplemental disability coverage for income protection if your existing disability policy doesn’t make up enough of your usual pay following an injury or illness. Standard disability insurance policies come with strict limits and often only cover 40%-60% of your regular income. These policies also tend to have a maximum dollar coverage cap, such as $10,000 per month, regardless of your typical income.
With only disability insurance, you might be limited to a small payout of only $3,000-$5,000 per month. If you’re used to earning much more than this, your existing disability coverage may not be enough for you to maintain your lifestyle. That's why adding disability insurance supplemental coverage can be extremely beneficial to provide more income while you're out of work.
Supplemental Disability Benefits Explained
An individual supplemental disability policy comes with several benefits, such as:
- Higher coverage limits: Supplemental disability policies allow you to receive a payout that more closely resembles your typical income from before you became injured or ill and unable to perform your previous job duties. Supplemental disability policies often pay closer to 80% of your pre-disability income.
- More complete income coverage: While standard disability policies only factor base salaries or hourly rates into their calculations for monthly coverage benefits, supplemental disability policies also take other income sources like bonuses and commissions into account. Because of the additional income sources factored into supplemental disability coverage, policyholders have a greater chance of receiving a payout much closer to what they previously earned.
Supplemental disability insurance may be especially important for formerly high-income earners. If you’re used to making an annual salary of at least $120,000, or more than $10,000 monthly, a benefit cap of $5,000 per month might not even come close to what you’ve become accustomed to living off of. Supplemental disability insurance allows you a greater chance of maintaining your usual lifestyle following a serious injury or illness.
What’s the Difference Between Short-Term and Long-Term Supplemental Disability Insurance?
The difference stems from your main disability policy. A short-term disability insurance supplement comes with a maximum coverage period of two years, but it’s often purchased for a period of less than six months.
Supplemental long-term disability insurance is meant to cover you for a much longer period, ranging from a few years to the rest of your life. Short-term and long-term disability policies come with different coverage limits and premiums.
When someone purchases a short-term disability policy and is still disabled after the coverage period ends, they must switch to long-term disability insurance to continue receiving benefits. However, some people aren’t able to get long-term disability insurance, so supplemental policies can help to fill in those coverage gaps.
Supplemental disability insurance can be combined with both short-term and long-term policies. The key difference is the duration of the disability.
Save on Disability Income Insurance
Our independent agents shop around to find you the best coverage.
How Much Does Supplemental Disability Insurance Cost?
Whether supplemental disability insurance makes sense for you depends on a few different things. For starters, the cost of your main disability insurance policy is based on several factors, such as:
- Your age
- Your occupation
- Your health history
- Your salary
The cost of a disability insurance policy is often between 1% and 3% of your annual gross income. Your payout benefits are also taxed if you're covered by employer supplemental disability insurance through your job. So you may already be paying a decent amount toward a standard disability policy. However, many people still consider supplemental disability insurance well worth the additional premium.
How to Know If Supplemental Disability Insurance Is Right for You
Supplemental disability coverage may be right for you if the following factors apply:
- You’re a high-income earner.
- Your main disability policy’s benefit is too small.
- Your main disability policy’s coverage period is too short.
- Your employer offers coverage that doesn’t meet your needs.
- You lose your disability policy following a job change.
- You have private long-term disability insurance and also qualify for Social Security disability insurance (SSDI).
If you have employer-sponsored long-term disability insurance, any approved SSDI claims will subtract from your main policy’s benefit amount, which is already taxed. However, if you have a private long-term disability policy along with supplemental disability insurance and also qualify for SSDI, your benefit amount won’t be affected. If you’re still unsure of whether supplemental disability coverage is right for you, an independent insurance agent can help answer your questions and clear up any confusion.
Compare Supplemental Disability Insurance Quotes with an Independent Insurance Agent
To get the supplemental disability insurance protection you need, you’ll want to work with a trusted expert. Independent insurance agents have access to multiple insurance companies, so they're free to shop and compare supplemental disability quotes and policy options for you. They'll get you matched with a policy that offers the best blend of coverage and cost.
Consider your unique needs, then connect with an agent to help you take it from there. Have a list of your specific concerns and desires on hand before you reach out, to help the process run even more smoothly.
https://www.iii.org/article/what-are-types-disability-insurance