Employer disability insurance (short- and long-term) replaces part of your income during medical leaves. Premiums fund benefit payments; employers may pay them fully or partially. Key details to review include benefit percentage, elimination period, duration, and the plan's definition of disability. Check state disability programs and consider supplemental coverage if gaps remain.

Why employer disability insurance matters

Life can interrupt your ability to work: an injury, surgery, childbirth, or a serious illness. Employer-sponsored disability insurance replaces part of your income while you recover. It protects your household budget so you can focus on getting well instead of worrying about missed paychecks.

Short-term vs. long-term: what each covers

Short-term disability (STD)

STD generally covers temporary leaves - recovery from surgery, childbirth leave, or short-term illnesses - for a defined period after a short waiting (elimination) period. Typical STD plans pay a portion of your salary while you are out of work, then stop when you return. Benefit levels and lengths vary by policy.

Long-term disability (LTD)

LTD begins after the STD period or a longer elimination period and supports people with prolonged or permanent disabilities. LTD benefits can continue for years or until retirement, depending on plan terms.

What premiums buy you

Premiums fund those benefit payments and plan administration. Employers may pay the full premium, share the cost, or offer voluntary plans employees buy with after-tax dollars. Employer-paid plans often provide easier approval and lower cost for employees.

Common features to check in any plan:


  • Benefit amount: plans usually replace a portion of your pre-disability income.


  • Elimination (waiting) period before benefits start.


  • Benefit duration and any age limits.


  • Definition of disability ("own-occupation" vs. "any-occupation").


  • Offsets for Social Security or workers' compensation.


  • Carryover or portability if you leave the employer.


Note: typical benefit percentages, waiting periods, and durations vary by insurer and employer. Common benefit ranges and waiting periods are often cited in industry materials but can differ by plan and state .

Cost vs. value

Disability premiums are often modest compared with the income protection they provide - in many cases just a few dollars per pay period for substantial coverage. The exact cost depends on your age, salary, occupation, and whether the employer subsidizes the plan.

Practical steps to take

  • Ask HR for the Summary Plan Description and a benefits worksheet.
  • Confirm who pays premiums and whether benefits are taxable if employer-paid.
  • Review the disability definition and elimination period.
  • Check state disability programs: some states provide mandatory short-term disability or paid family leave that can interact with employer coverage (for example, California and New York have state programs) 1.
  • Consider supplemental voluntary coverage if employer-provided benefits would leave you with a large income gap.
Even if you never use it, disability insurance eases financial risk from an unexpected health event. Review your employer's plan terms and compare them with your household budget and other protections so you and your family can plan for the unexpected.
  1. Verify common benefit percentage ranges and typical waiting/elimination period ranges used by employers and insurers in 2025.
  2. Confirm the most current list of U.S. states that operate mandatory state disability insurance or paid family leave programs and update examples if needed.
  3. Confirm industry-sourced typical premium cost examples (e.g., "a few dollars per pay period") to ensure accuracy.

FAQs about Disability Insurance Premiums

What is the difference between short-term and long-term disability?
Short-term disability (STD) covers temporary medical leaves for weeks to months with a short elimination period. Long-term disability (LTD) begins after the elimination period or STD ends and supports longer or permanent disabilities, sometimes until retirement depending on the plan.
Will employer-paid disability benefits be taxable?
If your employer pays the premium for disability insurance, benefits you receive are generally taxable as income. If you pay premiums with after-tax dollars, benefits are typically tax-free. Confirm tax treatment with HR or a tax advisor.
How much of my income will disability insurance replace?
Plans commonly replace a portion of pre-disability income. Exact percentages vary by plan and insurer; check your policy for the stated benefit amount and whether offsets (like Social Security) apply .
Should I buy disability coverage if my employer offers it?
Usually yes: employer plans are often low-cost and convenient. But check the benefit percentage, waiting period, duration, and portability. If coverage falls short, consider a supplemental individual policy.
What is the elimination period?
The elimination period (waiting period) is the time you must be disabled before benefits begin. It can range from a few days for STD to several months for LTD; your plan documents will state the exact period.