Disability insurance replaces a portion of income when the policyholder is unable to work. When policyholders are disabled, they often have extra medical expenses. A reduction in income could hurt.

Sometimes the recipient receives the benefit tax free, other times the amount is taxable. When the benefit comes tax free, the net amount is often close to regular earnings.

 

Short-term disability insurance and the Family Medical Leave Act (FMLA) are sometimes taken simultaneously. People can easily confuse the two together, when they are completely separate and distinct.

One provides income replacement as a private insurance program. The other provides unpaid job protections as a federal regulation. There are other differences as well.