When you’re young, fit and healthy, it’s difficult to imagine that life could be different. That’s why most people never give disability a second thought. But consider this—you’re more likely to become disabled than die prematurely. And according to the Social Security Administration, a quarter of today’s 20-year-olds will become disabled before they reach retirement age.
If you were to become part of this statistic, how would you pay your bills? This is where disability insurance steps in. Disability insurance covers a portion of your regular salary when a disabling injury or illness prevents you from earning an income. Here are the key things you need to know about disability insurance.
You may be covered by workers compensation. While not mandatory in all states, most companies with four or more employees are required to take out workers compensation insurance, which provides wage replacement and medical benefits to employees who are injured or disabled on the job. If your employer carries workers’ comp and you’re injured on the job you can expect at least two-thirds of your pre-disability salary. There were approximately 2.9 million nonfatal workplace injuries and illnesses reported in 2016. However, according to the National Safety Council, almost 75% of long-term disabilities are non-work related.
Social Security, also known as Old Age, Survivors, and Disability Insurance (OASD) is a free alternative funded by the federal government. If your disability is expected to last an entire year or result in death, you may qualify for Social Security disability benefits. However, the disability must prevent you from engaging in any form of regular work and anyone who earns above $1,180 per month is not deemed disabled. If you qualify for Social Security, you can expect to receive between $700 and $1,700 per month. However, according to Social Security Administration, only 65% of those who apply are successful.
It pays to check whether your employer provides disability coverage. The company may offer a short-term policy, which could supplement your income for up to three months, or a long-term policy that could replace 40-60% of your income pre-tax for an extended period of time. One of the advantages of taking out disability insurance with your employer is your chances of being denied are slim because its a group plan. Plus, you often receive a discounted rate.
Buying your own disability insurance policy is the most expensive option, but it’s also the most flexible and reliable. Unlike employer-provided insurance, you’ll never lose your cover, provided you continue to pay your premiums. Benefits range from 40-80% of your pre-disability income, and as long as you pay for your premiums with after-tax money, your benefits will be tax-free.
When a disability occurs, the battle to recover and adjust to life’s new challenges begins. For most people, disability also marks the start of a fight to stay financially afloat. That’s why it’s essential to understand that prices are aligned with the benefits of a policy, and choosing a policy or program on price alone is not the smartest option. Unfortunately, as there is little assistance out there, so we always recommend taking out as much disability insurance as your budget allows.
If you have any questions regarding disability insurance, give Your Insurance Gal a call today.