Voluntary Disability Insurance: How it Works & Coverages

voluntary disability insurance

Voluntary disability insurance provides financial security for individuals who may face illness or injury during their working years. But before you buy, you must understand what it is.

What is voluntary disability insurance?

Voluntary disability insurance is like a safety net if you get sick or hurt and can’t work. It’s something you choose to buy yourself, not through your job. This gives you more control over what it covers and how much help you can get.

Unlike disability insurance from work, which might have rules, voluntary disability plans can be changed to fit your needs and budget. When you buy voluntary disability insurance from an insurance company, you can pick the coverage that matches your income and lifestyle.

This insurance gives you money if you can’t work because you’re sick or injured. It helps cover things like rent, groceries, and doctor’s bills when you can’t earn money.

What are the two types of voluntary insurance?

Voluntary disability insurance is typically offered in two main types: short-term disability (STD) insurance and long-term disability (LTD) insurance. Each type serves a distinct purpose and provides different levels of coverage and benefits.

What is voluntary, short-term disability insurance?

Short-term disability insurance, often called STD, gives temporary help to people who can’t work because they’re sick or injured. It covers part of their income for a short time, usually up to six months.

This type of insurance steps in when someone is disabled but expected to get better soon. It’s like a bridge until they can start getting long-term disability benefits. A short-term disability helps them stay financially stable while they’re unable to work.

To get benefits, there’s usually a waiting period where the person has to be disabled before the insurance starts paying. After that, the insurance company starts giving them money, usually a percentage of what they earned before they got sick or hurt.

What is voluntary, long-term disability insurance?

Long-term disability insurance, also known as LTD insurance, gives money to people who can’t work for a long time because of a disability. Unlike short-term disability, which helps for a short while, long-term disability insurance lasts longer, often until they retire.

This insurance is for folks who can’t go back to work for a while because they’re sick or hurt. It starts helping after short-term disability benefits run out, giving continuous income to the person who’s insured.

These policies can be different. Some might last for a certain number of years, while others keep paying until the person reaches a certain age, like 65 or when they retire.

What does it cover?

Voluntary disability insurance helps when people can’t work because they’re sick or hurt. It covers a lot of different things, like:

  1. Chronic illnesses: These are long-lasting health problems like diabetes or heart disease that need ongoing treatment and might make it hard to work.
  2. Pregnancy complications: If there are issues during pregnancy or childbirth, like gestational diabetes or postpartum depression, this insurance can help.
  3. Accidents: If someone gets hurt in a fall, car crash, or sports accident, this insurance can cover it.
  4. Mental health conditions: It also helps if someone can’t work because of mental health issues like depression or anxiety.

This insurance doesn’t just replace lost income. It also helps with other costs, like: 

  1. Living expenses: These pay for things like rent, groceries, and bills to keep a household going.
  2. Medical bills Cover doctor visits, hospital stays, medications, and therapy sessions.
  3. Other bills: It can help pay off debts, like credit cards or student loans, and save for things like retirement or education.

What are the pros of having this type of insurance?

Having voluntary disability insurance is a good idea because

  • Financial protection: In the event of disability, voluntary disability insurance provides a source of income when individuals are unable to work.
  • Customizable coverage: Individuals can tailor their coverage based on their specific needs and budget.
  • Portability: Unlike employer-sponsored disability plans, voluntary disability insurance is portable. This means individuals can maintain coverage even if they change jobs or become self-employed.
  • Tax benefits: Benefits received from voluntary disability insurance are often tax-free.

Are there cons to voluntary disability insurance?

While voluntary disability insurance is helpful, there are some things to think about

  • Cost: Buying this insurance means paying premiums, which can be hard if money is tight.
  • Coverage limits: Some policies don’t cover everything, like certain health conditions or injuries. It’s important to read the policy carefully to know what’s included.
  • Who can get it? Some people might not qualify for this insurance because of their income or health history.
  • Hard to understand: The terms and rules of these policies can be tricky. It’s important to take time to understand them and ask questions if needed.

Is it worth it to have voluntary disability insurance?

Deciding whether to get voluntary disability insurance is a big choice. There are some things to think about, but the good stuff usually outweighs the not-so-good. Here’s why getting this insurance can be a smart move: 

  • Keeps money coming: Voluntary disability insurance is like a safety net for your wallet. If you can’t work because of a disability, it helps cover some of your income. This means you can still pay for things like rent, bills, groceries, and medical costs, even if you can’t work.
  • Peace of mind: Having this insurance can help you relax. You know that if something happens and you can’t work, you won’t be left with no money coming in. It lets you focus on getting better without worrying too much about money.
  • Made for you: These insurance plans can be adjusted to fit what you need and can afford. You can pick how much money you’ll get, how long you’ll wait before getting paid, and how long the coverage lasts. This way, you get the right amount of help when you need it.
  • Goes where you go: Unlike some job-based insurance, this one goes with you if you change jobs or work for yourself. You don’t have to start over with a new plan every time you switch jobs.
  • Tax-free help: Most of the time, the money you get from this insurance isn’t taxed. This means you get to keep more of the money you get, which can help when you’re not able to work.

In the end, whether you should get voluntary disability insurance depends on you. Think about how stable your money situation is, how healthy you are, and how much risk you’re comfortable with.

Understand what voluntary disability insurance is

Voluntary disability insurance is super useful for protecting your income and keeping you financially secure if you can’t work because of a disability. It gives you different options for coverage, can go with you if you change jobs, and often comes with tax benefits. This insurance is a big help when things get tough, but it’s smart to think about whether it’s right for you before you buy it.


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