Disability insurance is not something people consider. Everybody knows that at some point they are going to die. Income stops at death, even if you are working and earning income at the time of death. One of the purposes of life insurance is to provide money for your survivors upon which they can live. There are other purposes, too, but for this article, we’ll use that as the main one.
Death is awful, but one of the advantages of it is that it is final. Religion aside, it is finis, kaput, “that’s all, folks.”
Things get more complicated when an injury or an illness leaves a person disabled. The disability can be so extensive that they are unable to work at all, or extensive enough that they cannot return to their prior occupation. If they have others to support, life can be turned upside down. If they are only responsible for themselves, and life nonetheless becomes much harder.
Disability Insurance And Loss of Income Tips
Here are some tips and resources to deal with disability and resulting loss of income. Some should be considered ahead of time, but a few can be triggered if and when disability occurs:
- Disability insurance through work. This may be short-term disability provided as an employee benefit without cost to you. It may not become a benefit available until after you worked for a given period of time, much like health insurance. Often, short-term disability benefits, which are a percentage of your earnings, last for 90 days. The money will usually come from an insurance company, but you will have to report the occurrence and stay in touch with the Human Resources Department of the employer so that it knows what is going on.
- Larger employers may offer long-term disability insurance. Some employers pay for it, some share in the cost, and some employers have you pay the whole cost. Like short-term disability insurance, long-term disability pays a percentage of your earnings. Depending upon the insurance plan, benefits might last until you reach 65 or even older. The terms of the long-term disability plan dictate the benefits, what disabilities trigger benefits, and what you must do to periodically show continued entitlement to benefits.
- Sick Leave. Most employers, even small ones, grant sick leave. Sick leave is simply a number of days each year that, if you are unable to work, you can take off and get paid. Therefore, if you sustain a minor injury resulting in a limited disability, you might consider using sick leave days to attend to it. Normally, no insurance company is involved.
- Private Disability Insurance. This is a kind of disability insurance that an individual buys him or herself to protect his or her income. The policies are issued by licensed life and health insurance companies and sold by licensed life and health insurance agents (producers). The amount of insurance that you can buy is a function of your income at the time you buy the policy and can range from about 50%-80% or so. Naturally, the higher the monthly benefit, the higher the premium. You can also choose among several “elimination periods” for benefits to start. An elimination period is the time that you will wait to collect the benefits after you have met the requirements of the policy. A longer elimination period correlates with a lower premium, much like a higher deductible on your car insurance collision coverage correlates with a lower premium.
There are other variants of private disability insurance. An example is a policy that will pay if a doctor can no longer perform surgery although he or she can still perform other aspects of a medical practice.
- Social Security Disability (SSDI). SSDI is a government program funded by Social Security taxes. A person can be entitled to benefits if they have a sufficient number of paid-in “quarters” of social security taxes. Their disability must be expected to last for at least a year. The nature of the disability must be such that no gainful employment is possible. The amount of the benefit payable is a function of the amount that the individual paid into the system when working. More information can be found here.