Is Social Security Disability Enough to Protect My Income?
Why you need private disability insurance
Americans pay taxes in order to receive benefits, rights, protections and services. However, sometimes those privileges come with strict guidelines and long waiting periods. Government disability insurance is often such the case.
True, the Social Security Administration (SSA) has a disability program. However, it has tight restrictions and a long wait. Social Security pays disability insurance benefits to only those who suffer a total disability. This is defined very strictly and it doesn't cover partial or short-term disabilities.
In many SSA cases, people do not qualify for disability benefits or they must wait years before receiving any. Some would say the SSA standard is to initially reject the majority of applications and then accept them only after an appeal process. Many people are without income for sometimes three years before receiving benefits because of backlog of applications and appeals is so long.
So, if you have a severe injury or illness that doesn't meet SSA guidelines, or you have a partial disability that isn't covered at all, how can you protect yourself? A private disability insurance policy is the answer.
Employee workers' compensation is mandated in every state. This covers on-the-job injuries. However, if you were injured elsewhere or became ill, workers' compensation would not apply. But, with a private disability insurance policy, you would be protected.
Most employers offer a limited group disability insurance package, but it often doesn't provide enough protection to prevent financial loss and hardship. Again, if you had a private disability insurance policy you would be protected.
Think of disability insurance as paycheck protection. Though many think the chance of becoming disabled is small, the Social Security Administration reports that a 20-year-old worker has a 3-in-10 chance of becoming disabled before reaching retirement.
If you become injured or ill and cannot work and have private disability insurance, you could receive monthly benefits of up to 70 percent of your income. When you can't work, bills quickly pile high, with medical expenses often adding to the debt. It is easy to drain your savings unless you have massive resources to buffer the loss of income.
There are several areas to consider when comparing private disability insurance policies. One thing is how "disability" is defined by the carrier. Each DI carrier has a different definition. Make sure you understand the carrier's definition and then consider how it applies to you and your job. You must understand what is covered in your policy and what is not.
The second area to consider is the DI policy's elimination period (waiting period), which is the length of time you must be disabled before benefits kick in. Elimination periods vary from 30 to 180 days.
Thirdly, compare each disability insurance policy's benefit length. This is how long you receive benefits while disabled. Is the policy's benefit length for two years or a lifetime?
Finally, ask if the policy offers both short-term and long-term disability protection. Short-term disability insurance protection covers temporary disabilities that last from a few weeks to a couple months. For injuries and illnesses that may last for years, you need long-term coverage. If you can't afford both long-term and short-term protection, choose the long-term. Many workers have enough resources to cover a couple months' salary. Also, many employers offer short-term policies.
One more benefit of private disability insurance is that the policy follows you if you change jobs. When transferring jobs, there is no risk of losing benefits.
It's easy to find the right coverage for you and your budget as private disability insurance policies have many variables and options. This simple and affordable coverage offers the extra protection to save you from future hardship if you should become disabled.
- Goldman, Jeff. "Disability Insurance: Disability Insurance Basics." Investorguide.com.
- "Benefits for People With Disabilities." Social Security Online.