Charles Flaxman is a personal injury lawyer in Hollywood, Florida, and the head of the Flaxman Law Group. He has 10 years experience as an insurance claims adjuster, giving him a valuable perspective of personal injury law from both sides. In this article, he discusses types of disability insurance and how to know if you’re sufficiently covered.
Unfortunately, many people underestimate the likelihood of becoming disabled. In fact, a 20-year-old worker today has an almost 1 in 3 chance of becoming disabled before retirement age (67) according to the Social Security Administration (SSA). Unfortunately, disability insurance is often overlooked when people plan for the worst. While employees are less likely to die prematurely than become disabled, twice as many have life insurance than disability insurance. Shockingly, almost half of the American work force has neither short-term nor long-term insurance.
Total disability is defined by the inability to perform the responsibilities of your occupation for a minimum period of time that will differ between insurance providers. Partial disability is when you are unable to perform at least one of your positions more important responsibilities. Partial disability benefits are typically half of total disability benefits, and they are also typically short-term.
Although most of the time making payments for disability insurance can seem like an unnecessary burden on your checking account, that security can save you from financial ruin in case you become disabled. Realize that you’re not Superman/woman, perform your own risk assessments and use the information in this guide to decide whether to purchase disability insurance or additional disability insurance.
Types of Disability Insurance:
- Social Security. It’s not just for retirement. If you meet certain criteria regarding duration of employment, you, and even certain members of your family, will be able to receive benefits. Notwithstanding taxes, social security disability benefits are free. Apply at the Social Security Administration homepage and after providing information that includes your Social Security number, birth certificate, medical records and your most recent W-2 form, a state agency will evaluate whether they consider you disabled.There are 2 important differences between Social Security Disability Benefits and most private and employer-provided disability benefits: One criteria that will be used to determine whether to award you Social Security benefits is that you are unable to work at any job, not just at your most recent one. Also, Social Security does not provide people with partial or short-term disabilities with benefits.
- Employer-Provided. Many companies offer disability insurance with their benefits packages, and just like with any insurance, there are many types. While some employers pay the entire cost of disability insurance, others only offer the option to elect for disability insurance at a discounted group rate. In addition, the insurance your company provides could be short-term or long-term. Obviously long-term disability insurance is preferable, since disabilities are sometimes lifelong afflictions. Make sure you know which type you have—you can check your hiring manual or with your HR department—before looking into private plan options.
- Private Insurance. Paid for by the individual, private insurance is recommended for persons who do not have adequate government or employer-provided disability insurance. To determine whether private insurance is for you, you need to determine what your budget is and whether the benefits you would receive in case of disability from Social Security and/or your employer will cover your expenses.
A private policy should ideally cover up to 80% of your salary—insurers typically won’t cover your entire pay. Experts recommend employees buy disability insurance as early as possible since it becomes more expensive with age and any health problems that may appear.
All disability insurance policies contain disability exclusions, such as:
- Occupational injuries (These are covered by workers’ compensation)
- Self-inflicted injuries
- Injuries incurred while committing a felony
- Injuries incurred during military service
Again, we recommend opting for long-term insurance for the same reason mentioned above.
If you become disabled, don’t put off filing a claim. Disability benefits start from the time you file your claim, not when you first became disabled. There will however be an elimination, (or waiting) period, which typically lasts 30 days. The point of this elimination period is to weed out claims for very short-term disabilities.
