What Program is the Major Source of Disability Income Insurance?

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.

1. The American Journal of Medicine, Vol 122, No 8, August 2009
2. Americans With Disabilities, U.S. Census Bureau, May 2006
3. Social Security Administration, Fact Sheet 2009
4. 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
5. 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.
6. An Employer’s Guide to Disability Income Insurance. America’s Health Insurance Plans, 2009.
7. Pre-existing conditions may be excluded from coverage for up to one year following the policy effective date.