Colorado Disability Insurance

Protect your income with long-term, short-term, and Social Security disability insurance in Colorado.

What is Disability Insurance?

Life insurance and health insurance are generally the first things that come to mind when you think about protecting your financial security. However, do not overlook disability insurance. Your ability to earn money is your biggest asset and a central part of any financial plan. Disability insurance protects your income and keeps money flowing in when illness or injury stops you working. There are short-term and long-term versions, as well as disability insurance from the Social Security Administration. Read below to learn about the different types of disability insurance, how it works, and who needs it.

Short-Term Disability Insurance

Short-term disability insurance covers up to 80% of your gross monthly income and costs (on average) 1 – 3% of your annual salary. The benefit period is 3 – 6 months, and the elimination period is less than 14 days. It is typically employer sponsored.

Long-Term Disability Insurance

Long-term disability insurance covers up to 60% of your gross monthly income and costs (on average) 1 – 3% of your annual salary. The benefit period is 2, 5, or 10 years, or until retirement, and the elimination period is 30 – 720 days. It can be employer sponsored but private policies also exist.

Social Security Disability Insurance

Social Security disability insurance covers a percentage of your income (the average being $1,197 per month). The benefit period lasts as long as you are disabled and the elimination period is 6 months. It is provided by the US government.

Disability Insurance: How Does It Work?

At times when you can’t work, disability insurance replaces your income so you can take care of your family, your home, and yourself. Benefit payments from private policies are tax free and pay out over a specific period of time outlined in your policy (employer plans can be taxed). Different types of disability insurance offer different features. Here’s the lowdown on essentially how they are made up:

  • Premium: This is how much your policy costs each month. It is based on the benefit amount, the benefit and elimination period, and other factors.
  • Benefit amount: The amount you’ll receive per month. This should equal at least 60% of your pay before tax.
  • Benefit period: The length of time you’ll get benefits for. The maximum period for short-term disability insurance is a year, while long-term can continue until retirement.
  • Elimination period: This is the length of time until you’ll start getting payments. Generally, longer waits mean cheaper policies.
  • Definition of disability: The qualification that allows you to receive disability payments. Own-occupation disability insurance policies define disability as being unable to work in your usual occupation, regardless of whether you could work in another job.
  • Riders: Riders let you customize policies, such as by adding a cost-of-living adjustment or residual disability benefit. Riders can make your policy more expensive.
Remember that disability insurance is not the same thing as workers’ compensation. The majority of disabilities happen outside of work, so they aren’t covered by workers’ comp, which only covers injuries or illnesses incurred at work.

The Different Types of Disability Insurance in Colorado

All disability insurance essentially provides a monthly benefit when you can’t work, but they do come in different forms.

Short-Term Disability Insurance

This is generally a free or low-cost choice taken through an employer. You can purchase it separately but it is usually as expensive as long-term policies. Short-term disability insurance has to expire before your long-term insurance begins.

Long-Term Disability Insurance

This product can be offered by employers as group coverage or privately purchased. It is the best disability insurance option for most people. Long-term disability insurance lasts longer than short-term, is simpler to qualify for, and offers bigger benefits than Social Security options.

Social Security Disability Insurance

This is offered by the government. Most people under 65 qualify for these benefits, but it is very hard to qualify for and if you do qualify, it can still take almost two years before you receive anything. Additionally, the average monthly payment is less than $1,200 and it can taxed.

 

Most people are best off with a short-term disability policy from their employer and a private long-term policy.

Frequently Asked Questions

Why Does Disability Insurance Matter?

1 in 4 workers will become disabled before reaching retirement. Given that most disabilities last longer than short-term policies and it is very hard to qualify for SSDI, long-term disability insurance is an important part of your financial security. It can stop you from dipping into your savings or falling behind on day-to-day outgoings.

Do I Really Need Disability Insurance?

Illness is more common than injury, so it’s important even if you don’t have a labor-intensive job. It is particularly useful if you have student debt, given that unpaid leave makes it easy to fall behind on loan payments. If you have a high income, disability insurance can also help you. Occupations in medicine, law, and similarly high-skilled professions generally come with student debt, high living costs, and special skills that can make it tricky to find another job.

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