What Does Disability Insurance Cover?

November 22, 2023 | J. Price McNamara
What Does Disability Insurance Cover?

A disability can have devastating financial effects on you and your household if you must stop working, and many people carry disability insurance for financial protection if this happens.

Disability insurance should pay you for a portion of your income you would have earned had you continued working. In theory, disability insurance is a smart investment or a very valuable benefit that your employer provides.

However, based on the way many disability insurance companies operate, you have to fight for this benefit in many cases. Never hesitate to seek assistance from an experienced long-term disability lawyer if you need to file a claim for benefits.

How You End Up With Disability Insurance Coverage

You can get disability insurance coverage in two ways:

  • You can purchase coverage privately through a company
  • Your employer provides coverage through your job

The source of disability coverage matters when you file your claim, as the appeals process and other requirements can differ with employer-sponsored coverage.

Disability Insurance Covers Lost Income But Not Medical Expenses

Disability insurance covers part of your income only when an illness or injury prevents you from working for some time. Disability insurance does not cover workplace injuries. The workers’ compensation system covers those injuries.

In addition, disability insurance does not cover your medical bills. Hopefully, you can maintain health insurance coverage while out of work, whether through the Affordable Care Act or government-provided insurance.

Disability insurance covers a short or long-term health condition. You can suffer severe pain when you have a debilitating condition, such as a back injury that developed over time (as opposed to exertion from work). Alternatively, you might have a longer-term illness, such as cancer, that keeps you from working.

Your Condition Must Fall Within the Policy’s Disability Definition to Qualify for Benefits

A disability policy is a contract between you and the insurance company. Someone, whether you or your employer, will pay the premiums to the insurance company. In turn, the insurance company promises to pay you a percentage of your pre-disability earnings when you cannot work. The predicate for coverage is that you meet the policy’s definition of disabled.

For example, the Hartford Insurance Group, a major disability insurance provider, says the following in its plan description:

Typically, disability means that you cannot perform one or more of the essential duties of your occupation due to injury, sickness, pregnancy, or other medical conditions covered by the insurance.

Insurance Companies Make it Harder to Get Benefits After Two Years

However, after 24 months, insurance companies can make it harder for you to keep receiving disability benefits. Instead of qualifying for benefits when you cannot perform the work associated with your own job, the definition tightens to require being unable to work at any job at all.

This is when insurance companies terminate many people’s benefits. They have their own so-called independent doctors examine you to determine whether you can perform any work, including sedentary tasks. If the company decides you can work after receiving benefits for two years, it may cut off your benefits.

How Long Your Benefits Last Depends on the Policy

The duration of your benefits depends on your insurance policy:

  • Short-term disability benefits can cover up to one year, depending on the particular policy (some policies cover as little as three months, while others can provide you with benefits for up to one year)
  • Once you exhaust your short-term disability benefits, you can apply for long-term disability benefits. Theoretically, they can pay you for as long as you should have worked. Your benefits will usually continue until you reach normal retirement age. However, as described above, insurance companies will often cut off your benefits any way they can because they know they will pay you a large amount of money over the years.

The Proportion of Your Earnings Covered Will Vary

The actual benefits that you receive depend on your particular policy. Disability insurance may cover 40 to 70 percent of your pre-disability earnings, up to a certain maximum, as the policy specifies. If you purchase a policy on your own, you can buy additional coverage that might pay you more.

If you purchased the policy on your own, the premiums you pay depend on the level of coverage. Obviously, you will pay more money if your policy promises you a higher percentage of your earnings.

In many cases, you receive disability insurance from your job. Many employers provide a comprehensive employee benefits package to compete with other employers. However, your employer has nothing to do with whether you actually get benefits. That decision is within the sole province of the insurance company, and it doesn’t always go your way.

Your Claim Might Pay a Lot of Money

Since disability benefits cover you for the time that you cannot work, your claim might pay you millions of dollars.

Insurance companies will do everything they can to get out of paying your benefits. They know the financial ramifications and the impact on their bottom line. If they can sharpen their pencil in any way to keep you from qualifying for benefits, they will not hesitate to do so.

At the same time, you need these benefits to keep a roof over your head.

While the insurance company initially decides whether you qualify for benefits, they do not get the final say. You may appeal any denial of benefits.

Why You Need an Attorney for a Disability Benefits Claim

Given the importance of the claims process, hire an attorney at the start of your claim. If you experience difficulties in the process, you can end up in a long legal battle to possibly get what you deserve.

An attorney can help from the beginning of the claims process. They can file the claim with the insurance company. They will know whether you fall within the policy’s strict definition of disabled.

Put your best foot forward to have the strongest chance of qualifying for benefits with your initial application. Otherwise, insurance companies are more likely to deny an initial claim.

What Attorneys Do to Help Your Disability Benefits Claim

Your lawyer can prepare an initial claim that gives the insurance company a true look at your condition.

Your initial claim can include:

  • Medical evidence, including the objective test results that show the extent of your condition
  • Statements from your treating physicians that give their own opinion of your condition and what they have seen in your test results
  • Statements from family and friends who observe you daily and what they have seen
  • An impact statement from you, which describes your daily existence and what you are dealing with
  • Testimony from a vocational expert who can give their opinion about whether you can do your job

The claim file requires enormous effort and forethought  The insurance company barely needs a reason to deny your claim. Hire a disability lawyer. You do not want to give them any additional reason besides their own financial motive.

Appealing a Disability Claim Denial

If the insurance company denies your claim, you need to appeal. Then, you absolutely need an attorney to handle your case. You must persuade the court to reverse its denial.

There are two pathways to appeal your disability benefits denial:

  • If you purchased the policy on your own, the insurance company will breach its contract if they do not pay you benefits. You can file a contract claim against them in state court. If the insurance company acted in bad faith, you may even sue them directly for the damages you suffered due to their actions.
  • If your long-term disability policy comes through work, your claim will fall under ERISA. This federal law gives the insurance company an advantage over you in the appeal. They essentially get a free look at your case before going to court because they hear the first appeal. If and when they deny your appeal, you must then take your case to federal court.  You cannot bring additional medical records to address the insurance company’s reason for denying your claim. A district court judge will review the same appeal file that the insurance company saw and determine whether the insurance company made an error in denying your benefits and appeal. Although ERISA has built-in advantages for the insurance company, you can win your case with an experienced disability lawyer.

You can fight the insurance company in court and win. Judges often see through the insurance company’s actions and grant you the disability benefits that the insurance company denied you.

You Could Negotiate a Settlement That Pays You a Lump Sum

Settlements are a common outcome in disability appeals. The insurance company realizes that they will need to spend a large amount of money to defend your case. Your attorney is working for you on a contingency basis, while they need to pay their own lawyers by the hour or a flat fee for the case. They also fear losing badly in court and potentially setting a negative legal precedent for future cases.

Insurance companies may negotiate with you and give you part of the benefits that you deserve. You can lessen some of your risk and negotiate a settlement agreement for a defined payout. Your attorney can get you most of the benefits you otherwise should have received if the insurance company granted your claim. A settlement agreement can also remove the possibility that the insurance company might cut off your benefits in the future.

You Do Not Need to Pay a Disability Benefits Attorney Upfront for Their Services

Always hire an attorney for a disability case, even if you don’t expect a fight. An attorney will fight back when the insurance company tries to push you around.

You do not have to pay a ERISA attorney out of your own pocket. They only charge legal fees if you successfully receive benefits in your case. If you do not win your case, your attorney does not receive payment. This way, you risk nothing to hire an experienced attorney and take on the insurance company when they have done you wrong.

However, not hiring an attorney for an appeal can cost you the chance to get the benefits that you critically need. There is little chance that you can go round-for-round with the insurance company in court without an attorney fighting for you every step of the way.

J. Price McNamara Author Image

J. Price McNamara


Losing my own brother, then my father and sister after long, disabling illnesses just a few months apart drove a career change for me. Before that experience, I never truly understood the place you’re in. I never understood the dramatic impact that receiving (or not receiving) the disability and life insurance benefits you paid for and counted on can have on your life especially when you need to focus on family and healing. What I experienced with my own family now drives the way I view my clients and my work, and I will never forget it!

Author's Bio