What is disability insurance?

If you think about it, your ability to generate income is probably your most valuable financial asset—and one that’s extremely important to your family’s lifestyle and future. After all, a consistent income helps pay your day-to-day expenses and is also an essential way to build wealth over time. Disability insurance is a proven way to help protect your most valuable asset by replacing a portion of the income you could lose if a disabling sickness or injury prevents you from working. 

Here’s how disability insurance works.

If you become disabled due to a sickness or injury while this coverage is in place, you may be eligible to receive monthly benefit payments that you can use to help financially support your loves ones and maintain your quality of life. When you qualify for disability benefits, payments will begin at the end of your Elimination Period (an amount of time specified in your policy), and these benefits may be tax free depending whether premiums were paid with before or after-tax dollars. Unlike health insurance payments, disability benefits are paid directly to you, so you are free to use your benefits however you like: to pay the mortgage, to cover childcare—or to simply keep up with your day-to-day expenses. As long as you continue to qualify for disability benefits, payments will continue until you are able to return to work, or until the end of your benefit period, whichever comes first.

You choose how long your benefits last.

When it comes to disability insurance, there are two basic types of coverage: coverage that offers short-term benefits and coverage that offers long-term benefits. In many cases you will have two available options to secure this coverage: through group insurance offered by an employer or trade association, or by purchasing an individual policy directly from an insurance company. For your convenience, we’ve provided brief descriptions of each type of coverage and the ways you can purchase the coverage:

Short-term disability insurance can provide weekly benefits for a limited time—usually six weeks to two years. This coverage is designed to offer what is known as “own occupation” coverage which means benefits are paid if you are disabled due to a sickness or injury and are unable to perform the material and substantial duties of your particular occupation. As long as you are covered at the time of your disability and you qualify for benefits, short term disability coverage will typically replace 60% to 80% of your income. This coverage can be an effective way to protect yourself from the financial impact of a temporary loss of income due to a disability. Please note New York Life does not currently offer individual short-term disability coverage.

Long-term disability insurance, as the name suggests, is designed to provide financial protection for an extended period of time. Benefits are designed to last for a period of years, or to cover you to a specific age such as 65 or 70.² If you have long term disability coverage and become disabled with a disabling sickness or injury, this coverage can replace 50%-70% of your income. With long-term disability insurance, you can qualify for benefits if you meet the definition of disability contained in your policy and meet other eligibility requirements. While the specifics of coverage vary, many long-term disability policies will pay benefits if you are unable to perform the substantial and material duties of your “own occupation” for the first 24 months of your claim. After benefits are paid for 24 months, the definition of disability in some policies changes to “any occupation.” This means benefits are payable when you are unable to perform the material duties of “any occupation” for which you are qualified by reason of your education, training, and experience. Many insurance companies offer an enhanced definition of disability options which allow you to extend the period of time you may receive benefits based on your ability to perform the duties of your “own occupation”. This coverage will usually cost more.   

Government programs may not be enough.

While government disability benefit programs, such as Social Security Disability Insurance (SSDI), are available to most workers who have been in the workforce for a period of time, the benefits these programs can provide may be insufficient to address all your financial needs in the event you become disabled and they typically do not offer all the features and benefits that you can purchase with an individual policy.³ In addition, some programs, such as the Worker’s Compensation program only cover work-related causes of disability if you are injured while on the job.

So should I choose group or individual long-term disability insurance?

As we said earlier, there are typically two ways to obtain disability insurance coverage. One is obtaining coverage through your employer or by purchasing an individual policy from an insurance company directly.

While group coverage from your workplace may provide sufficient income protection, it’s important to realize that individual coverage can offer several additional advantages—and can be used to supplement your group workplace coverage:

Why should I consider Individual disability coverage? 

There are many reasons to choose individual coverage. For example, individual disability insurance coverage is perfect for small business owners who may not have the option of purchasing coverage through a large employer. Small business owners, self-employed certified professionals and primary income generators for a family are ideal candidates for purchasing individual coverage. In addition, professionals and high income wage earners who are likely to earn a considerable amount of money during their careers are good candidates for individual coverage. Individual disability insurance can also help replace more than just salaries such as bonuses and commissions and is a great solution for sales professionals, stockbrokers, and other non-salaried producers or representatives that receive income above straight salaries.

In the case of an individual disability insurance policy like New York Life’s MyIncome Protector, you can customize your disability policy by adding optional riders (for a fee) that can enhance your coverage. For example: You can add a Catastrophic Disability Rider that provides an additional benefit if your injury or sickness causes a severe cognitive impairment and/or you are unable to perform two of the six daily activities of daily living without assistance.

Get the individual disability insurance benefits you need.

If you would like to purchase individual disability insurance on your own, be sure to ask a New York Life financial professional about MyIncome Protector. With this coverage, if your salary can support it, you can apply for up to $20,000 a month in benefit payments⁵ and you can customize your policy to meet your specific needs. You also keep the coverage even if you change jobs or employers. Best of all, this coverage is backed by New York Life, a company that has been honoring its commitments since 1845—so you know that it will be there for you when needed.⁶

We’re here to help.

If you would like to know more about MyIncome Protector, please contact your New York Life financial professional. Together, you can review all your options and determine a path that makes sense for you.

¹ LIMRA Insurance Barometer Study, 2021.

² For New York Life MyIncome Protector, the length of coverage for benefit payments can be two years, five years, 10 years, to age 65, to age 67, and to age 70.

³ The average SSDI benefit was $1,146 a month, or $13,752 a year (as of March 2021).

⁴ For New York Life MyIncome Protector, dividends are not guaranteed but may be declared after the end of the fifth policy year.

⁵ Benefit amounts are subject to underwriting and income qualifications.

⁶ New York Life has received the highest financial strength ratings currently awarded to any U.S. life insurer by Standard & Poor’s (AA+); A.M. Best (A++); Moody’s (Aaa); and Fitch (AAA). Source: Individual Third-Party Ratings Reports as of 9/30/2021.

⁷ The average SSDI benefit was $1,146 a month, or $13,752 a year (as of March 2021).