Imagine you are a non-disabled worker, and you have no expectation that you will have to touch your savings because of any medical condition. Unfortunately, statistics show that any worker can suffer an illness or injury that leaves them unable to work. While we do not wish this upon anyone, it can happen to anyone, and it does to millions each year. The goal of disability insurance is to protect a portion of your income while you recover or adjust to your condition. While many employers offer short and long-term disability benefits, some do not, and getting these benefits can be tedious. Your other option is to rely on your savings and family for support. Fortunately, there is a third option if you do not have employer-sponsored disability coverage - purchase a private individual disability policy. If you have a private policy and suffer a disability, getting your benefits can be challenging. You must speak to a local disability insurance lawyer when you need to tap into your benefits.
Employer-sponsored disability insuranceWhile you always have the option to purchase an individual plan, it is usually best to see if your employer has a group policy you can join. The costs and eligibility are different for group versus individual plans. The insurance company will not evaluate you as an individual and will only consider your employment status. These plans will often work with SSDI benefits, and you can purchase add-ons if available. These plans do not move with you, so your benefits end once you leave the company.
Social Security Disability InsuranceWhile Social Security is an excellent program in theory, it has its pitfalls. The eligibility requirements are extensive, and anyone employed or self-employed can only participate once they reach a certain threshold. This benefit is unavailable to people who currently have a disability and have no work history; they will have other benefits available. There are many nuances to these benefits, like your earrings, work history, credits, and future prognosis. You must prove you will be out of work for a minimum of 12 months. Even if you meet all the qualifications, you will still need to wait an extended waiting period before you can receive benefits. While you can attempt to supplement your income through a state or federal social security plan, it will take time, and you need options. Many employees use their short-term disability benefits, then long-term ones, while they file and get approval for Social Security benefits. One caveat is when you begin to receive Social Security benefits, your long-term disability benefits will be offset by the amount you get from SSDI, depending on the policies and regulations.
Short and Long-Term DisabilityShort-term and long-term disability insurance work similarly for the most part, minus a few distinctions. The critical difference is when and how long you can access these benefits. The benefit period will vary; as the names suggest, one is shorter, and the other is longer. Short-term disability covers you for a temporary period and is what you will use initially. Long-term benefits apply to persistent or permanent disabilities, and they might last indefinitely until retirement age. Typically, short-term benefits last until long-term benefits can begin. Benefit periods range by policy, as does the percentage of your income covered. Long-term disability will begin after you exhaust short-term benefits, and it can last for much longer. If you qualify for long-term disability, there is a shorter span of a couple of years after which your benefit eligibility can change. The waiting periods to receive benefits also vary per policy and insurer. The elimination period for the short term is days or weeks, while the long term can take months and a year in some cases. To see if you can expedite the process, you can work with a disability lawyer.
Health insuranceMost people assume that health insurance will cover their expenses when they suffer an injury. While health insurance will cover medical costs, you will still need to pay copays and daily expenses, and it does not cover lost income. These expenses can take you over the edge if you cannot work. You will also need to consider what happens when you suffer from a disability. Health insurance is essential for medical needs, but it only goes so far, and you will need additional protections for you and your family. Since most health insurance is tied to employment, you can lose eligibility for their health insurance plan when you begin to get long-term disability. You might continue receiving health insurance through COBRA until you qualify for Medicare. However, some short-term disability plans offer you enough insurance to get you to the point where you are eligible for other health insurance plans.
Factors to considerMany factors go into the decision of whether to purchase an individual plan. Additionally, the insurance company will consider several things before determining how much you will pay and what provisions they will include. While a group policy will not have as many hurdles, individual policies do. However, when you weigh out the possibilities of what can happen when you do not have insurance, you will likely not want to risk it.
Hazardous occupationsIf you work in a hazardous field like a warehouse with heavy machinery, you will likely need to pay more than someone who works in an office. You also have a higher chance of injury or illness when you have a hazardous workplace. The insurer will consider your occupation when they determine your rate.
Health statusPast and current health conditions can also affect your insurance rate and options. If you have a history of debilitating diseases like asthma, chronic back issues, and more, you will likely have a higher rate as you will need more protection. Since you have a history of suffering from these conditions, you will probably need to use these benefits.
Benefit periodThe benefit and the elimination period should be determining factors in making your decision to purchase a policy. Both periods are instrumental to your policy. The elimination period is how long you need to wait before you can access benefits, and you will need to find other resources, like your savings and emergency funds. The benefit period is also essential because that is how long you will receive benefits, and once this period ends, you need to have another source.
Disability definitionYour description of disability will likely be different from Social Security or private disability insurance but what matters is the definition written in the policy. The definition of disability is vital to your claim and benefits because depending on which definition the insurer uses will determine the benefits you can receive. If they use the same definition as Social Security, you can access more benefits than if they use a more generous definition. You should also consider if the policy offers partial benefits, meaning you can work only for 20 hours a week.
Supplemental disability insuranceFor additional disability coverage, you can purchase an add-on that is supplemental disability insurance. It will help you protect a large portion of your income, commissions, and bonuses, some employers will purchase group policies that offer this add-on, but you will need to do your research.
How much you needSince everyone has different needs, you must consider yours when choosing a policy and add-ons. Most people have no idea where to begin, but here are some costs you should consider and how you will pay for them if you are unexpectedly out of work:
- Child care
- Loan payment
- Auto expenses
- College expenses
- Retirement savings
- Other regular expenses you have