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What is disability insurance?
Disability insurance is an important source of financial protection—one that millions of Americans rely on to help replace the income they would lose if a sickness or injury prevented them from working. This article explains how disability insurance works, the many benefits it offers, and how it helps safeguard your lifestyle and future.
Nearly 45% of adults in the U.S. could not cover three months of living expenses if they lost their income.¹
Here’s how disability insurance works
Your ability to generate income is one of your most valuable financial assets. Disability insurance is a proven way to help protect that asset by replacing a portion of the income you could lose if a disabling sickness or injury keeps you from working.
A quick overview of disability insurance
While every disability policy works a little differently, this coverage generally pays benefits if you are unable to perform the duties of your specific occupation, or can’t work at all. Once your disability claim is approved, you’ll receive monthly benefit payments that replace a percentage of your prior earnings. Benefits usually begin after an elimination period (often 30, 90, or 180 days) and continue until you can return to work, reach the end of your benefit period, or hit your policy’s maximum payout—whichever comes first.
How do I use my disability insurance benefits
Unlike health insurance benefits, disability benefits are paid directly to you, so you are free to use your benefits however you like: to pay the mortgage, cover childcare—or to simply keep up with your day-to-day expenses. What’s more, these benefits may be tax free depending on whether your premiums were paid with before- or after-tax dollars.
Short-term vs. long-term disability insurance
When it comes to disability insurance, there are two basic types of coverage: short-term benefits and long-term. Here’s a brief description of each type of coverage and the benefits they usually provide:
Short-term disability insurance
This coverage typically provides weekly benefits for a limited time—usually six weeks to two years. As long as you are covered at the time of your disability and qualify for benefits, short-term disability coverage will typically replace 60% to 80% of your income. Please note: New York Life does not currently offer individual short-term disability coverage.
Long-term disability insurance
As the name suggests, this coverage is designed to provide financial protection for an extended period of time. Benefits are designed to last for a period of years, or to cover you to a specific age such as 65 or 70.2 If you have long-term disability coverage and become disabled with a disabling sickness or injury, this coverage can replace 50% to 70% of your income.
Government programs may not be enough
Government disability programs, such as Social Security Disability Insurance (SSDI), may provide benefits to eligible workers, but those benefits may not be sufficient to meet all your financial needs.3 In addition, some programs, such as workers’ compensation, only pay benefits if you are injured on the job.
Should I choose group or individual long-term disability insurance?
There are typically two ways to obtain disability insurance coverage. You may be able to secure coverage through your employer (group coverage), or by purchasing a policy from an insurance company directly (individual coverage). While group coverage may offer sufficient income protection, individual coverage offers additional advantages and can be used to supplement your group workplace coverage:
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Individual Coverage |
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Typically replaces 40% to 60% of your salary but may not include other forms of compensation like bonuses, commissions, or other variable compensation. |
Typically replaces 50% to 70% of your salary, as well as bonuses, commissions, and other forms of compensation. |
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Benefit payments are taxable if the employer pays for coverage. |
The benefits paid by an individually owned policy are tax-free if paid with after-tax dollars. |
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No underwriting is required. |
Underwriting is required. |
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Is not dividend eligible. |
May be eligible for dividends.4 |
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Rate guarantees are typically not offered or are short-term (<5 years). |
Premium rate guarantees are typically available. |
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Coverage is owned by the employer and may be canceled, and may not continue if you leave. |
Coverage is owned by you and can be taken with you if you leave your employer. |
Why consider individual disability coverage?
Individual disability insurance can be especially valuable for small business owners, sole proprietors, and self-employed professionals who may not have access to group coverage. And because individual policies usually offer greater flexibility and higher levels of protection, they can be ideal for doctors, attorneys, sales professionals, and other high-income wage earners. Unlike some group policies, individual disability insurance often replaces bonuses and commissions, making it ideal for non-salaried workers or those who receive other types of compensation.
In the case of an individual disability insurance policy like New York Life’s MyIncome Protector, you can customize your disability policy by adding optional riders (for a fee) that can enhance your coverage. For example: A Catastrophic Disability Rider can provide additional benefits if your injury or sickness causes severe cognitive impairment and/or cannot perform two of the six activities of daily living without assistance.
Get the individual disability insurance benefits you need
If you would like to purchase individual disability insurance on your own, be sure to ask a New York Life financial professional about MyIncome Protector. With this coverage, if your salary can support it, you can apply for up to $20,000 a month in benefit payments5 and you can customize your policy to meet your specific needs. You can also keep the coverage even if you change jobs or employers. Best of all, this coverage is backed by New York Life, a company that has been honoring its commitments since 1845—so you can be confident that your lifestyle and future are securely protected.6
What is disability insurance: FAQs
Purchasing individual disability insurance is a personal decision, but it can help protect your lifestyle and future if a loss of income would create a financial hardship for you and your family.
The cost of individual disability insurance is determined by the policy and the benefits you select, as well as the rate classification you receive in underwriting. That’s why it’s so important to work with a financial professional who will help you look at all your needs and circumstances and help you create a customized solution that’s right for you.
No, New York Life does not currently offer this type of coverage. Our MyIncome Protector policy is designed to provide long-term protection.
While every policy is different, individual disability insurance generally covers disabilities that are the result of sickness or injury. Coverage exclusions, such as preexisting conditions or occupational hazards, will be outlined in your policy. What’s more, the types of coverage offered by different carriers may vary, as will the length of the elimination period (the amount of time that must pass before benefits begin) and the requirements to be eligible for benefits, so it’s important to compare policies before making any decisions.
Yes, these two products operate independently. Any health or medical expense coverage you have is separate from any disability coverage you may purchase. In fact, if you buy disability insurance and become eligible for benefits after becoming disabled, you can use your disability benefit payments to help pay for your health insurance premiums or for expenses not covered by health insurance.
Whether you retain your employment after becoming disabled depends on your specific employer, or your type of occupation. In addition, there may be state and local laws that affect your employment status if you become disabled.
If you have group coverage and your employer is paying your premiums, then any disability benefits you receive may be taxable as income. On the other hand, if you purchase an individual disability insurance policy and are paying the premiums yourself, then any benefits you receive are generally 100% tax-free.
It depends on the type of coverage your policy offers. Some policies offer “Own Occupation” coverage, which pays benefits if you are diagnosed with a qualifying disability and are unable to perform the material and substantial duties of your specific job. Other polices offer two years of this coverage but change to “Any Occupation” after two years of benefit payments. This type of coverage pays benefits if you are disabled and cannot perform the duties required for any job that fits your education, training, and background. There is also a third option that allows you to be employed in a different occupation other than your own and still receive disability benefits if you cannot perform the material and substantial duties of your specific job. With New York Life MyIncome Protector, you can choose from any of these three options.
Government disability benefit programs may provide some assistance; however, the coverage offered may not meet all your financial needs. Government programs such as SSDI base the amount of your benefits on how long a worker has been in the workforce and may not offer a variety of features and options. In addition, a program like workers’ compensation only covers work-related causes of disability.
We’re here to help.
If you would like to know more about MyIncome Protector, please contact your New York Life financial professional. Together, you can review all your options and determine a path that makes sense for you.
RELATED CONTENT
Want to learn more about disability insurance?
A New York Life financial professional can help determine what’s right for you.
1 “Report on the Economic Well-Being of U.S. Households in 2024—May 2025,” Federalreserve.com, https://www.federalreserve.gov/publications/2025-economic-well-being-of-us-households-in-2024-savings-and-investments.htm
2For New York Life MyIncome Protector, the length of coverage for benefit payments can be two years, five years, and 10 years, to age 65, to age 67, and to age 70.
3The average SSDI benefit was $1,492 a month in 2025 Source: “Monthly Statistical Snapshot (December 2025),” SSA.gov.
4For New York Life MyIncome Protector, dividends are not guaranteed but may be declared after the end of the fifth policy year.
5Benefit amounts are subject to underwriting and income qualifications.
6New York Life Insurance Company and New York Life Insurance and Annuity Corporation have received the highest financial strength ratings currently awarded to any U.S. life insurer by A.M. Best (A++), Fitch (AAA), Moody’s (Aa1), and Standard & Poor’s (AA+). Source: Individual Third-Party Ratings Reports as of 8/1/2025.