People never expect to become disabled, but when it happens
they usually wish they had been more prepared with income protection.
In spite of laws that are intended to prevent discrimination against people with disabilities, data from 2004 shows that only 35% of disabled people in the United States were actually working, compared to 78% of the people without disabilities. The reasons vary—from a sheer inability to engage in any kind of work to a reluctance on the part of employers to provide special equipment or take a financial risk of a disabled person sustaining an on-the-job injury.
The fact is, disability rates are climbing, and while the cause was at one time more likely to be an injury—either on or off the job—the causes of many of today’s disability claims is related to illness. Younger people are being diagnosed with cancer, diabetes, and heart disease than ever before; these and other illnesses are chronic conditions that often make full-time employment a physical impossibility. If there is a silver lining on this cloud, however, it’s that disability insurance companies do not require an injury in order to provide you with replacement income. If you plan ahead, you can maintain a reasonable style of living even if you do become disabled while you are young.
I signed up for disability insurance on the job.
Perhaps you have disability insurance at work, but it’s important to understand group disability insurance which comes in two “flavors.” The first is short term which is really just “sick leave.” It allows you to be out for a few days or weeks without any loss of salary. Usually you have to earn the number of days you can use. It is a convenience in the event of an accident or illness from which you will recover. If you do not recover, you will go on “long term disability” if the employer provides it. This will pay a portion—ranging from 40% to 80% of your salary and could last from 2 to 4 years. When the specified time period runs out, so does your check.
Doesn't my health insurance pay for disability?
Health insurance will pay your medical bills as long as you have the health insurance, but it will not replace your income.
What about Social Security Disability?
According to the Disability Statistics Center, over 19 % of the non-institutionalized population in 2000 (that is, the people were not already in a nursing home of some sort), are reportedly disabled. The majority of these, if they receive funding at all, are receiving it from Social Security. However, the pay is minimal, sometimes as little as $500 or $600 per month depending on how much a person paid into Social Security before becoming disabled. Additionally, it takes from 2 to 4 years to get approval to receive SS disability benefits. One can go bankrupt or lose a home—and many do—long before receiving a benefit which isn't enough when it finally does come. To make matters worse, it’s not uncommon for a person to die before getting approved for disability benefits.
What will disability, income protection insurance pay?
The actual amount is usually dependent on your income which is averaged for the three years prior to becoming disabled.
How long would a disability income last?
The period of a disability policy depends on the contract and on the company. You want one that will last at least until you are eligible for Social Security if possible although a three to five year policy is cheaper. Most companies will not continue to pay once you are eligible for your regular Social Security check.
Will I be able to work part time?
This will depend on the policy. Most policies do allow you to work part time and to even collect benefits while training for a new job—assuming your disability will allow you to simply take a different job. You generally have decreased benefits if you are able to work.
When will I start to collect benefits?
You can choose your elimination period or deductible. That is a time period during which you will not collect benefits after you become disabled and varies from 30 to 90 days. You should plan ahead enough to have several months of savings that will keep you afloat financially while waiting for your disability insurance to kick in.
How will I know if I'm getting a good policy?
This is a good question, but one that many clients fail to consider. Generally, the best way to ensure that you have sufficient and/ or affordable coverage will be to work with a real person who can explain all of the details of the policy to you and can go over your options in plain English. Disability insurance can be complicated. For starters, the premium is likely to be based on the danger of your occupation. Dangerous jobs require higher premiums for disability insurance. Also, your premium changes according to the percentage of income you want replaced. You don’t want to make the mistake of paying for a policy only to find out that almost nothing qualifies for benefits under the terms that you purchased.