disability insurance

General disability insurance questions General disability insurance is priced according to the elimination period, benefit period, age, occupational class, and benefit amount.  It can aid employees by providing a valuable benefit of disability protection.  It is available through an employer or from private insurers.  It is poorly understood, but as vital a coverage as life insurance.  General disability insurance is a decisive type of insurance, When Am I Considered Disabled? The definition of disability will vary depending on the terms of your own individual policy. Some policies pay when you’re unable to perform the duties of your own occupation, while others pay only if you’re unable to perform in any job suitable for you based on your training, education and experience. Some general disability insurance policies and plans may use an own-occupation definition for a period of time (e.g., two or three years), after which an any-occupation definition is applied. Other general disability insurance policies and plans require that you not be gainfully employed while you’re collecting benefits. There are policies and plans that will pay you a portion of your monthly general disability insurance benefit if you have lost a part of your income due to a disability—usually referred to as a residual or partial disability benefit. Additionally, some policies and plans include a rehabilitation benefit that pays some or all of the cost of occupational rehabilitation approved by the insurer. Keep in mind that many general disability insurance policies and plans will not cover disabilities caused by suicide attempts, drug abuse, war, or attempts to commit a crime. Disabilities due to pre-existing conditions are also frequently excluded. When Will Benefits Start? Benefits will begin to accrue shortly after the end of the waiting period. Most individual disability policies and group plans have a waiting period (e.g., 90 days, 180 days). When you choose individual general disability insurance, consider how long you can manage without a paycheck. If you have significant savings, you may be willing to choose a longer waiting period. The longer the waiting period, the lower the premium. Under most group plans, generally the employer selects the waiting period. How Long Will Benefits Be Paid? With individual disability income policies, you can select the maximum time your benefits will be paid, subject to the insurer’s underwriting guidelines. With most group disability plans, the employer selects the maximum duration of benefits. The most frequently offered benefit periods are two years, five years, or to age 65. Policies with shorter benefit periods will have lower premiums. How Much Disability Income Insurance Do I Need? It’s generally recommended that disability coverage be chosen to replace 60 to 70 percent of your total taxable earnings. If you purchase general disability insurance with after-tax dollars, your benefits will usually be income tax free. If you have group disability insurance provided by your employer, however, benefits will generally be taxable. Small business owners have special concerns and should consider obtaining professional advice about policy options that protect a business if the owner becomes disabled (e.g., overhead expense policies). To estimate the benefit amount you would need if you became disabled, ask yourself how much monthly income would cover your living expenses. Would these expenses go up or down if you became disabled? These expenses must be carefully considered. Work-related expenses may go down. Medical expenses may increase. Education expenses may increase as you retrain. Some insurance policies may have premium waivers. By considering all these factors, you should be able to come up with an appropriate amount. To get an estimate of how much disability income insurance you would need to maintain your current standard of living, complete the following steps using the “Disability Insurance Planning Worksheet”. Download the Disability Income Insurance Planning Worksheet. What Additional Benefits are Available? Social Security. Social Security disability benefits may be available to eligible individuals prior to age 65, depending on your income and how long you have been paying Social Security taxes. Generally, if you become disabled before reaching age 65 and you have a steady work history, you may qualify for monthly Social Security disability benefits. The payment may be equal to the amount you would get if you had reached age 62 at the time the disability occurred. Social Security disability benefits generally increase each year to keep pace with inflation. According to current Social Security guidelines, if you become disabled and you’ve been receiving a reduced retirement benefit or other disability benefit, your disability benefit may be reduced. Social Security disability benefits will generally stop when you reach age 65, and retirement benefits will begin. (Disability benefits will also stop in other instances not discussed in this booklet.) The Social Security Administration has very strict definitions of disability. You generally must be unable to engage in substantial gainful activity by reason of a physical or mental impairment that can be expected to result in death or last for at least 12 months. Social Security disability benefits are not intended for temporary conditions. You should also note that Social Security’s disability rules are different from those of other government or private programs. So while you may qualify for disability benefits under another program, you are not automatically eligible for Social Security disability benefits. There is also a 5-month waiting period for benefits. If a disabled worker dies before applying for benefits, the family can do so within three months of the worker’s death. Benefit payments may be subject to federal income tax. If you become disabled, call or visit your local Social Security office as soon as possible to determine your eligibility for this benefit, your spouse’s eligibility, and that of any dependent children. You can also determine the amount of your entitlement and the formula used for determining this amount. Don’t just report your disability; file an application at your local Social Security office. If the Social Security Administration turns you down, you can appeal. For more information, call the Social Security Administration toll-free at 800-772-1213. To expedite the application process, have

Which Disability Income Insurance are Available To Me If I Experience A Disabling Illness Or Accident? Chances are you already purchase home, auto and life insurance to protect yourself against the threat of loss. And you probably have health insurance to guard against costly medical bills. But what steps have you taken to help shield yourself, your lifestyle and those who count on you from an unexpected loss of income? Would you be able to meet your financial obligations if you became disabled and unable to work? The risk of disability is greater than most people realize. Consider these recent statistics: Every 90 seconds someone files for bankruptcy in the wake of a serious illness1 According to the US Census Bureau, more than 50 million Americans are classified as disabled2 Almost three in 10 of today’s 20-year-olds will become disabled before reaching age 673 In 2002, Social Security Disability Insurance (SSDI) participation rates were substantially higher than in 1980, especially for younger age groups. For example, from 1980 to 2002, the percentage of workers aged 25 – 39 who were on SSDI rolls increased by 46%.4 The participation rates for all ages combined increased by 31% over the same period.5   STATE AND FEDERAL ASSISTANCE PROGRAMS   SSDI Benefits Your salary and the number of years you have been covered under Social Security determine the amount of Social Security Disability Insurance (SSDI) benefits you can receive. The average monthly benefit from SSDI was just over $1,000 in 2007. In addition, the waiting time for the Social Security Administration to approve an SSDI claim can delay benefits for months.6 Workers’ Compensation Workers’ compensation is state-mandated indemnity insurance which covers lost income and medical expenses when injuries or illnesses are work-related. Typically, these benefits are equal to two-thirds of pre-disability income. PRIVATE INSURANCE   Long Term Disability Insurance Long Term Disability insurance, also known as group disability insurance, can be available at the workplace through your employer. The most popular long term disability insurance programs provide 60 percent coverage of your base salary. Long term disability insurance does not cover incentive income like bonuses. It is tied to your employment, and benefits are usually taxable. Benefits payable generally are reduced by any payments received under programs like SSDI and Workers’ Compensation.   Individual Disability Income Insurance Individual Disability Income insurance also offers financial protection in the event of a long-term disability. Individual disability insurance differs from long term disability insurance in that you own your policy, coverage is not tied to your employment, benefits are generally tax-free and incentive income, like bonuses, is covered. The amount of coverage available varies depending on your occupation and income. Guarantee Issue Individual Disability Income Insurance Individual disability income Insurance can also be available to groups at the workplace where it is offered as guarantee issue insurance. Guaranteed Issue Individual Disability Insurance has the same advantages of regular Individual Disability Insurance plus two more: The premiums for guarantee issue individual disability income Insurance are discounted at rates you cannot obtain otherwise Guarantee issue individual disability income Insurance is offered without regard to your medical history7, so if you are a participating employee or partner, you may obtain coverage for which you might not otherwise qualify   Business Owner Disability Insurance   Small business owners have special risks to consider should a disabling illness or accident prevent them from working to capacity or working at all. PROTECT YOUR INCOME AND YOUR LIFESTYLE Taking the time now to plan your income protection could mean the difference between a secure future for you and those who depend on you, and a devastating financial burden should you find yourself coping with a long-term disability. At a time when you are dealing with a disability, the last thing you need is financial worries. With adequate disability income insurance you can focus your attention on recuperating, rather than on how to keep your home. The American Journal of Medicine, Vol 122, No 8, August 2009 Americans With Disabilities, U.S. Census Bureau, May 2006 Social Security Administration, Fact Sheet 2009 Social Secuirty Advisory Board, 2003, as reported by Cornell University Institute for Policy Research in Disability Risk and Income Security for Workers: A StressedSupport System in Need of Innovation. David C. Stapleton, Richard V. Burkhause and Peiyon She, Cornell University. Robert Weathers, II, Mathematica Policy Research Inc. 2007 Average Duration of Disability Lasting More Than 90 Days. Beginning Prior to Age 65 Duration of disability is measured from the start of disability to (at most) age 65. An Employer’s Guide to Disability Income Insurance. America’s Health Insurance Plans, 2009. Pre-existing conditions may be excluded from coverage for up to one year following the policy effective date.