Key takeaways
Disability insurance comes in various types: short-term, long-term, and individual, each with distinct coverage lengths, costs, and portability.
A policy's "definition of disability" determines qualification: "own-occupation" pays benefits if you can't work your specific job, while "any-occupation" requires you to be unable to perform any job suited to your education and experience.
Key benefit terms include the benefit period (how long payments last), the elimination or waiting period (time before payments begin), and residual/partial benefits for partial loss of income.
Customization features like cost-of-living adjustments, future purchase options, and noncancelable provisions allow policyholders to lock in rates and expand coverage over time.
Disability insurance provides a portion of your income if you become sick or injured and are unable to work. It can help everyone who depends on their job for living expenses. The Social Security Administration estimates 1 in 4 of today’s 20-year-olds will experience a disability for 90 days or more before they reach 67.1 And it's not just physical injuries: Mental health-related leaves of absence tripled between 2019 and 2024.2
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If you’re considering a disability policy, or just learning about this coverage, it’s important to understand the key terms and phrases. To help you understand those terms, we’ve divided this article into three groups:
Basic disability insurance definitions
Claim and benefit definitions
Policy and coverage definitions
Basic disability insurance definitions
Long-term disability insurance: Also called LTD, this type of policy is designed to last for many years — up to retirement if needed — replacing around 40% to 60% of your income if something happens and you can no longer work.
Short-term disability insurance: Also called STD, this policy is designed to replace your income for a much shorter period than LTD — typically a few months until you can get back to work, and almost never more than a year.
Social Security Disability Insurance: Also called SSDI, this is coverage that comes as part of your Social Security benefits. However, it is usually much harder to qualify for, and the benefits are typically lower than with a disability policy you purchase individually.
Individual Disability Insurance: This is a disability policy you buy for yourself, typically purchased through a financial advisor. (For example, a Guardian financial advisor can give you a disability insurance quote.) Most policies sold this way are considered long-term.
Definition of disability
Every disability policy has a specific definition of disability that you must meet to qualify for benefits. A policy may also spell out different specific levels of disability (for example, "partial disability") along with the percentage of the total disability benefit you can receive under that definition. Many long-term policies use a blend of the following definitions.
Own-occupation
This may be part of a policy's definition of disability. "Own-occupation" means that, solely due to illness or injury, you are not able to perform the duties of your occupation. For example, a surgeon who becomes disabled and can no longer use their hands to perform surgery would likely qualify, even if they were healthy enough to do other work. Some policies apply the own-occupation definition for an initial period — often 24 months — before switching to a stricter standard.
Any-occupation
Like own-occupation, this is a part of a policy's definition of disability. With this kind of policy, you qualify for benefits only if you are unable to work in any occupation or other gainful employment for which you are suited based on your education, training, and/or experience. If you're still able to work at another job — even simpler, lower-paying work — you might not qualify for benefits. In blended policies, the any-occupation definition typically applies after the initial own-occupation period ends.
It's important to remember that disability benefits are evaluated on a case-by-case basis, taking into consideration the factual circumstances presented as well as the terms and conditions of the policyholder's policy.
Claim and benefit definitions
Benefit
The amount of money you receive each month in the event you are unable to work due to a disability, often as a set monthly amount. The benefit of an individual policy usually isn't taxed, unless you paid for it with pretax dollars.*
Benefit period
The length of time you can receive benefits under the terms of the policy. For a short-term disability policy, this will typically last 3–6 months and will not be more than a year; for a long-term disability policy the benefit period could range from two years (less common) to retirement (age 65, 67, or Social Security normal retirement age), or until you recover from your disability.
Claim
Disability benefits are never automatic — you need to file a disability claim showing proof of disability to start the process of determining whether you meet the policy's eligibility criteria for benefits. The insurance provider may also require medical records and a health history as part of the claim review.
Residual (or partial) benefit
A residual benefit, also called a partial benefit, allows you to qualify for benefits when a disability isn't a total disability, but rather when sickness or injury prevents you from working full time in your occupation and provides partial income replacement if you return to work only part time after a disability.
Cost-of-living adjustment
An optional provision (or rider) that allows your benefit to increase during extended periods of disability to help account for the costs of inflation.
Survivor benefit
A feature of some policies in which the insurance company pays your beneficiary a limited amount — typically equal to a few months of benefits — if you die during the benefit period. For individual disability plans, this may be referred to as "survivor benefits."
Transition benefits
If you have a business or professional practice, transition benefits help offset financial losses you may have while rebuilding your business after a disability. This can also be referred to as "recovery benefits."
Automatic increase benefit
An optional provision (or rider) which allows you to increase your disability benefits annually over a specified time period. The increases are a fixed percentage stated in the provision or rider.
Policy and coverage definitions
Coverage
An umbrella term for any or all of the monetary and other benefits (such as rehabilitation) you may be eligible for under the terms of the disability policy. In other words, disability insurance coverage is what you are buying when you purchase a policy, and disability insurance covers income replacement and related policy benefits rather than direct medical treatment costs.
Elimination period
Also called a waiting period. This is the period of time you have to wait after you are disabled until you may start receiving benefits. It'll generally be shorter for an STD policy, and longer for an LTD policy, with the waiting period measured from when the disability begins. Your benefit payments start after the elimination period is satisfied.
Exclusion
A condition or activity that the insurance company will not have to pay benefits for if it results in a disability.
Future purchase option
An optional provision (or rider) that will allow you to buy increased coverage at a later point, even if your health has declined, without having to provide additional medical information. Financial information may still be requested.
Pre-existing condition
A pre-existing condition (such as heart disease or cancer) you had before getting your policy. Many, but not all, pre-existing conditions can be excluded from disability coverage or may result in the individual paying a higher premium. Pre-existing medical conditions are often subject to a limitation clause for a set period of time. For example, if a person makes a benefits claim tied to a pre-existing condition, the benefit may be subject to a limitation if the claim is made during the defined pre-existing conditions timeframe, which is often within 12 or 24 months after policy issue.
Premium
The amount you pay for your policy. Your premium amount will vary based on the type of disability coverage, the benefit amount, benefit period, your health and health history, and the optional provisions or riders included in your policy contract. Premiums differ across disability insurance plans, depending on coverage features.
Reconsideration period
This is a provision that lets you ask the insurance company to reconsider and/or remove an exclusion from your policy — for example if a medical condition becomes resolved.
Underwriting
The process the insurance company uses to review medical records, health history, and other information before issuing coverage and setting the cost of your policy based on the risks involved. This is common with private disability insurance purchased from private insurance companies.
Simplified issue/underwriting
A type of policy where your premiums are calculated (or underwritten) without having to undergo a medical exam. This may result in higher premiums, because the insurance company assumes that there will be more medical risks involved.
Waiting period
Also called an elimination period. This is the period of time you have to wait after you are disabled until you can start receiving benefits. It’ll generally be shorter for an STD policy, and longer for an LTD policy.
Riders
Policy provisions that typically enhance your coverage, for example, a cost-of-living adjustment rider that increases your benefit to account for inflation. Riders usually come at an added cost to your policy but can provide important added value.
Non–cancelable provision
A common policy provision that states that the insurance company cannot raise your premiums or change the terms of the coverage as long as you keep paying them. Typically goes with a guaranteed renewability provision.
Guaranteed renewability
A common provision that states that the insurance company will renew a policy at the end of each term up to a specified age or date as long as the premiums are paid. The insurer may make changes in the premium rates.
Substantial gainful activity (SGA)
A term used by the Social Security Administration referring to work for which you get paid. In order to qualify for SSDI you're not allowed to earn over a certain dollar amount each month. Note that income from other sources, such as investments or interest, does not count as SGA income.
Attending physician's statement (APS)
An attending physician’s statement is a report from a doctor or medical facility that has treated you. During the underwriting process, the insurance company will often ask for an APS to either verify the state of your health or get more background about a medical issue.
Presumptive disability
Presumptive disability is a provision to start paying benefits earlier if you have a sudden, drastic disability such as the total and complete loss of sight in both eyes, hearing in both ears, speech, or the use of any two limbs. This is often not a provision for which you pay an extra premium — it's built into most contracts.
There’s a lot more to know about disability insurance. Talk to Guardian.
Knowing the terminology is a start, but there are a lot of things to think about when you’re considering a disability policy. How much coverage do you really need to maintain your lifestyle and cover household expenses during a period of lost income? What if you're closer to the end of your career? What if you're just starting out?
A Guardian financial advisor can help you better understand all the important issues to consider, and guide you to the disability plan that makes sense for you and your family.
Or get an online disability insurance quote to see how affordable a disability policy can be.
An insurance agent or financial advisor can help you compare your options and get the disability coverage that makes sense for you and your family.
