Another type of health insurance coverage is disability insurance, which replaces workers’ income when an accident or illness prevents them from performing their jobs. Disability insurance is less common than medical coverage, but it can be important to assure future financial security for any family that depends on each paycheck to meet its financial obligations. Benefits are generally structured to pay a proportion of a person’s actual earnings, usually from 40 to 60 percent. Short-term disability insurance covers up to six months of disability. Coverage for longer than six months is called long-term disability insurance. Most disability insurance policies limit coverage to a maximum period of time—such as to age 65—that determines the term of the policy.

A few U.S. states operate a system of public short-term disability coverage. The states collect payroll taxes from all workers to fund these programs. Employer-sponsored group plans can also provide disability insurance, but most employer-provided disability insurance ends when workers change jobs.

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