Social Security Disability
If you suffer a disabling injury or illnesses and you are no longer able to work at your job for an extended period of time, you may be able to replace a significant percentage of your income by having purchased long term disability insurance.
Should you be considering purchasing disability insurance, this article will assist you in understanding the basics of disability insurance and will help you make a more informed decision.
How Common Are Work Disabilities?
According to employment disability studies, it has been estimated that 1 out of every 4 American workers will suffer some form of disabling injury or illness before they reach the age of retirement.
What Is Disability Insurance?
Disability insurance is an insurance product you can purchase that is designed to replace 45-65 percent of your gross income on a tax-free basis should a injury or illness prevent you from earning an income in your chosen occupation. However not all disability companies define “disability” in the same way. Some may define disability based on the type of work you can do. Others may define it by the actual condition you have been inflicted with and deny disability coverage if you can still perform related types of work.
Will My Employer Cover Disability?
That depends on whether it’s a part of your employment benefit plan. Some employers as part of the employer-employee benefit plan provide disability insurance. This type of insurance is very expensive and therefore most employers do not offer this type of coverage.
Does Disability Insurance Cover 100 Percent Of My Former Income?
No. Disability insurance is not intended to cover 100 percent of your former income. Most in fact cover somewhere between 45 to 65 percent of your lost income.
How is disability is defined?
Some policies consider you disabled if you are unable to perform the duties of any job. Better plans pay benefits if you are unable to do the usual duties of your own occupation.
When disability benefits begin?
Most plans have a waiting period after an illness before payments begin. This provides the insurance company with additional time to fully investigate your claim and determine whether they will challenge it. Unfortunately, insurance companies have proven to be very aggressive in finding reasons to deny coverage, so make sure you are dealing with a reputable insurance company.
How long do disability benefits last?
The length of the benefit period varies depending on the type and quality of the disability policy you purchased. It can range from five years up until the time you are eligible for retirement. After the initial waiting period, payments are usually available until you reach age 65, though shorter terms are also available.
What Type Of Questions Should I Ask Before Purchasing Disability Insurance?
Disability insurance is expensive. What’s more, disability claims tend to be heavily scrutinized by insurance companies. The 2012 Consumer Action Handbook suggest that you ask the following questions before you purchase disability insurance:
Should I become disabled what specific dollar amount will I receive?
Will my benefits be reduced by Social Security disability and/or workers’ compensation payments?
Will my benefits be adjusted for inflation? If so what index is used?
Will you continue making contributions to my pension plan?
Will you cover commissions or bonuses on top of my base salary?
What about my 401(k) or other retirement contributions? How does this work in?
Will the payout go up should my income goes up in the future?
Will you guarantee that I can renew my policy each year at the same rate?
What if I’m unemployed and can’t pay the premium for a short period of time? Is there a grace period?
What injuries or illnesses does my policy specifically exclude? If I’ve already been treated for certain ailments like post-traumatic disorder or neck pain will you not cover those preexisting conditions?