Many people are wondering if disability insurance will cover them if they come down with COVID-19. The answer, as is often the case, is a qualified yes.
There are basically three types of disability income insurance: Employer-paid disability insurance, Social Security disability benefits and individual disability income insurance policies.
Short-term disability insurance may cover coronavirus if your illness requires medical quarantine that leaves you unable to complete your work.
For disability coverage to apply “there has to be a medical reason you can’t work” according to Nicholas Mancuso, manager of the disability and advanced planning team at Policygenius. Social quarantines, such as when states mandate that people work from home, do not qualify you for disability benefits.
Some survivors of COVID-19 are reporting lingering symptoms, including fatigue, joint pain, and shortness of breath. These people may be eligible for long-term disability.
“It’s generally more difficult to qualify for long-term disability benefits with the coronavirus because of elimination periods for long-term policies,” said Mancuso.
The elimination period of a disability insurance policy is how long you must be unable to work — for medical reasons — before you can start receiving benefits. Long-term disability policies have elimination periods of at least 90 days.
Employer-paid disability insurance is required in most states, and so is the most common. Most employers provide some short-term sick leave. Many larger employers provide short-term and long-term disability coverage as well, typically with benefits of up to 60 percent of salary lasting from five years to age 65. In some cases, long-term disability insurance is extended for life. Disability benefits from employer paid policies are subject to income tax.
However, individual disability income insurance policies are the best way to ensure adequate income in the event of disability for most workers, even those with some employer-paid coverage. When you buy a private disability income policy, you can expect to replace from 50 percent to 70 percent of income. Insurers won’t replace all your income because they want you to have an incentive to return to work. However, when you pay the premiums yourself, disability benefits are not taxed.
But unfortunately not many people have individual disability income insurance. More than half of U.S. workers forego disability coverage, according to a recent study. And baby boomers, who are more likely to get injured or sick, are even more likely to forego the coverage (7 out of 10).
If you are 40 years old, you have about a 40 percent chance that between now and age 65 you’ll be disabled for 90 days or more for any reason. Injury accounts for 10-15 percent of the reasons why people have long-term disability. Illness is the other 85-90 percent. And if you are disabled for 90 days or more, there is about a 50 percent chance that you’ll continue to be disabled for up to two years, according to Triple-I’s chief economist Dr. Steven Weisbart.
