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Disability insurance is like insurance for your paycheck if you are unable to work. When you are injured or ill and unable to work, disability insurance provides you with a percentage of your salary.
There are two types of disability insurance: short-term disability and long-term disability. Although many people probably have short-term disability through their employer, long-term disability insurance is the one that most people need and do not have.
In 2018, just 34% of workers had access to a long-term disability plan through their employer, according to data from the Bureau of Labor Statistics. If you're in the majority, you may need to seek out coverage on your own. The average monthly premium for disability insurance is $137 per month, according to NAIC data.
Here are the top insurers based on their financial credit ratings according to rating agencies Fitch or AM Best, complaint data from the National Association of Insurance Commissioners, and the average policy cost in 2018 from NAIC data.
More on the best disability insurance companies of 2021
Here's some more detail on our winners:
Learn more about Thrivent disability insurance
Learn more about Northwestern Mutual's disability insurance
Learn more about MassMutual's disability insurance
Learn more about Mutual of Omaha's disability insurance
Learn more about State Farm's disability insurance
Learn more about Assurity's disability insurance
What to look for in a disability insurance policy
Short-term disability vs. long-term disability: What's the difference?
These two types of insurance differ based on the length of time that the policy covers, and how much you could receive. Short-term disability insurance pays a higher percentage of your salary for a few months. A long-term policy might pay a smaller percentage of your salary, but could pay out until you retire.
You could have access to short-term disability insurance already through your employer — about 42% of private sector employees had access to a workplace short-term disability insurance plan according to the Bureau of Labor Statistics. But these plans only go so far: Long-term disability picks up where your short-term disability and emergency fund savings leave off.
A long-term disability plan often gives the most coverage for the money, making it a practical choice for most people over a short-term disability plan.
| Short-term disability | Long-term disability |
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Data from Guardian Life Insurance
Find a company that fits your budget and expectations
Unlike many other types of insurance, you'll often have to work with a broker or agent to get a policy. It can be hard to compare quotes and coverages.
When possible, start by getting a quote online. Life Happens offers a free disability insurance calculator. It's a good way to get an idea of not only how much you'll pay.
From there, you can get in contact with an agent. Many companies that sell disability insurance also sell life insurance — bundling a disability policy with your life insurance policy could be a helpful way to bring down costs.
Know the parts of the policy
There are several parts of a disability insurance policy to know and understand. They'll also affect the price you'll pay. Here's what to look for on your quote:
- Elimination period: This is the period you'll need to wait before your disability policy starts paying out. It's generally between 30 and 90 days.
- Monthly benefit: This is the amount your policy will pay out each month. Make sure that it meets your bare minimum expenses, or more.
- Premium: How much you'll pay each month to maintain your coverage.
To find the best policy for you, you'll want to find an elimination period that fits your emergency savings, and the highest monthly benefit for the lowest premium.
How we determined the best disability insurance companies
Insider only considered companies that sell individual disability insurance policies, and excluded companies that only sell group policies to employers. Three factors went into the score that ranked these insurance companies, with a lower score indicating a stronger position:
Financial security ratings
Rating companies Fitch and AM Best rate insurers on their financial strength and future outlooks. Insider gathered rating information on each insurer assessed, using these ratings to create a score out of 100.
NAIC Complaint Index
The National Association of Insurance Commissioners keeps data on complaints filed against all insurance companies. NAIC calculates the complaint index by dividing a company's share of complaints by the company's share of US market premiums.
Average premium in 2018
Data from the NAIC's Accident and Health Policy Experience Report provides data on individual insurance companies and each individual line of business. This report includes data on premiums collected through each line of business, and the number of policies issued.
Insider divided premiums earned by the total number of policies issued to find the average annual cost of each policy. The annual cost was then divided by 12 to find the monthly cost per policy.
Frequently asked questions
Why trust our recommendations?
Personal Finance Insider's mission is to help smart people make the best decisions with their money. We know that every person's financial situation is different, and that the best financial product isn't one-size-fits-all. We highlight the benefits of these insurance products in our ratings, but outline the limitations, too. We've spent hours poring over fine print so you don't have to.
Do I need disability insurance?
For most people, a long-term disability insurance plan is the best way to protect income in the event that you become disabled. The truth is that people can become disabled at any age and for any reason, and having a plan in place can help take the financial strain off.
If you think you have access to coverage through work, look at your policy and make sure that it's a long-term disability policy with sufficient coverage. In many cases, workplace policies only cover between 40% and 60% of your income. If your employer's coverage isn't sufficient, adding another policy on top can help, and continue to protect you even if you switch jobs.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Read our editorial standards.
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