According to the Social Security Disability program, a 20-year old worker has a 3-in-10 chance of becoming disabled before retirement age. Social security disability is generally determined on how much work history you need to have, known as the duration of work test, if you become disabled at various ages. For example, if you become disabled at age 50, you generally need 7 years. Applying for Social Security Disability is an option, but can take 3-5 months to receive benefits and will be less than half of your income.
Supplemental Security Income is the federal long term disability programs that makes monthly payments to people age 65 and older or who have a disability.
Besides Federal Disability, some states offer disability insurance temporarily which includes New Jersey, New York, Rhode Island, Puerto Rico, Hawaii, and California, according to the Cancer Legal Resource Center.
What is short-term disability coverage?
This can be a policy paid by the employer or employee. Generally the employee has to use all sick days before the employer pays for the extended illness or injury. Employees do need to work for an employer a certain amount of time and usually work over 30 hours a week. A percentage of your weekly salary is decided and then typically paid up to 26 weeks.
What is long term disability coverage?
This used to be insurance that was fully funded by the employer, but now it may be the employee’s responsibility or the employee may share the cost with their employer. This type of policy can be extended for some time beyond the terms of short term.
If you are in the market for a private disability policy, you should understand the differences and how your occupation may play a part. How total disability can refer to policies that pay benefits for your own occupation or any occupation which could include a lower paying job. It is important to talk to an agent to understand varying types of coverage.
Most plans pay a percentage of 50 percent to 60 percent of your total gross earning. There is a waiting period before disability benefits can start and how long the waiting period will also depend on the cost of premiums that you want to pay. Review the policy to check for available residual benefits, which make up the difference in income if the person is able to work in a partial capacity.
What disability coverage is right for me?
Ultimately, you want to examine your employer’s disability before you decide that more coverage may be necessary. Ask about supplementing that with other coverage. Private plans that are not tied to your current job can offer tax-free benefits and, of course, last longer than the job itself.
It is essential that you also investigate retirement assets that include pension plans, IRA’s and 401(k)’s which may offer better income options. Some of the plans will allow you to take money out for certain medical expenses.
The Cancer Legal Resource Center also reminds us to consider life insurance policies and their assets. If owning a whole life policy, you may be able to borrow from the cash value. You may also be able to sell you insurance policy to a third party, which is called a viatical settlement.
Check with a financial planner or insurance specialist to provide the best coverage for you. Disability can occur regardless of age and the earlier you cover all bases, the more protection your future will provide for you and your family.
Want to learn more about disability insurance? Read our article on Disability Insurance Basics.
