Many of my clients are surprised when I tell them this: your paycheck is your most valuable asset, not your house or your bank account. But what happens if you can't earn a paycheck for the time being? What happens to all your financial goals, not to mention the stack of bills that arrived in your inbox or mailbox?
Disability income insurance protects your paycheck. If you're sick or hurt and can't work, you can still get paid through your policy. Your family can still buy food, pay rent, and keep the lights turned on. No one wants an accident to happen. But if it does, disability insurance helps keep your bank account in stable condition.
Most disabilities are caused by conditions like back pain, arthritis, heart disease, cancer, or depression.* Let's say you slip and fall on the stairs at home and hurt your back. You can't work, but since the accident happened at home, you can't collect worker's comp. Does your family have enough cash on hand to survive the days, weeks, or even months you can't work? It’s something you probably don’t want to think about – but you can save a lot of future headaches if you do.
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Disability Insurance vs. Social Security
We hear from clients all the time who think government disability is all they need. But have you ever looked into government disability before you need it? There’s a lot most people don’t know – and it’s not good news.
SSDI: Social Security Disability Insurance
If you’re depending on government disability like SSDI, keep a few things in mind:
- You must have worked in jobs covered by Social Security for long enough to earn the requisite amount of work credits. (See ssa.gov for current requirements.)
- You must have a medical condition that meets the government’s definition of “disability.” You must be unable to lift, stand, walk, sit, or remember for at least 12 months.
- You have to wait through the 5-month waiting period.
- You have to attempt to change the type of work you do in order to find new work before you can qualify.
- 67% of Social Security disability claims are rejected.^ You may need to submit better medical documentation or correct a mistake on the application. Or the government may decide your condition doesn’t qualify. Do you really want to deal with this hassle while you’re unable to work? Wouldn’t you rather focus on recovery?
Disability Income Insurance
Now, let’s compare the points above to a disability plan you buy on your own. Private disability insurance presents a faster, easier option to get paid when you can’t work:
- You do not need to have worked in jobs covered by Social Security for any period of time. If you do freelance or part-time work, for example, you don’t have to worry about being denied SSDI because your jobs don’t qualify for government benefits.
- You must have a medical condition that meets the insurer’s covered conditions. These covered conditions may not include pregnancy or mental illness. But they do include major conditions like cancer, heart attack, stroke, fractures, and back disorders. It’s important to read the policy exclusions carefully before you buy to make sure the conditions you’re worried about are covered. I can help with that.
- You do not need to change the type of work you do to qualify. If you can no longer do your primary type of work, that’s enough to trigger benefits.
- You get to choose your benefit period. If you want to get monthly benefits until you retire, your policy can do that. If you want to keep you want the most affordable policy, you can limit benefits to a number of years.
- The elimination period is less than the government’s 5-month mandatory waiting period. In most cases, you can choose an exclusion period when you buy your policy. The longer the exclusion period, the more affordable the policy. Still, you’re unlikely to find a policy that requires as long a waiting period as the government. In most cases, you’ll have the option to choose a waiting period of 30 days, 90 days, or 120 days.
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Should I Buy Short Term Disability or Long Term Disability Insurance?
Short Term Disability
First things first – what is short term disability? That all depends on how you define “short term.” For the purposes of exploring your options, we’re going use the definition of a disability lasting less than one year.
Traditional short term disability insurance is usually offered via employer-sponsored programs. The federal government doesn’t offer short-term disability benefits. And as of 2023, only five states offer short-term paid disability leave: California, New York, New Jersey, Rhode Island, and Hawaii.** A small number of insurers let you purchase short term disability that will cover you for 1-3 years, which they sometimes market as short-term disability coverage.
Should you buy short term disability insurance? It all depends on your financial situation. Take a look at your savings, employer benefits, and other resources you have available. If you had an injury or illness that kept you out of work for six months, for example, could you get by? If so, you probably don’t need to buy a short term policy. If not, you may want both a short term and a long term policy.
Long Term Disability
On the other hand, a long-term disability is easier to define: it’s a disability that keeps you out of work for over one year – and possibly for the rest of your life. You can buy long term disability insurance from an insurance agent. As I mentioned above, the government also offers long term disability coverage (SSDI), which can be a hassle to qualify for and to get.
Should you buy long term disability insurance? If you value your paycheck, yes. It’s a lot harder to envision paying for life’s needs without help for years or even decades.
➡️Looking for a free disability insurance quote? Call me today!Schedule a Call
Ready to Buy Disability Insurance?
Here’s a quick checklist of questions to answer as you decide what to buy.
- Do you have coverage at work? If your employer offers disability insurance, take a look at the policy amount, type of disabilities covered, and waiting period. Most employer-sponsored plans offer minimal coverage ($10,000 or less) and they may only cover short- or long-term disabilities (but not both).
- What waiting period do you want? All private disability policies have a waiting period. A longer waiting period will cost less than a shorter waiting period. Be sure you price out 30-, 60-, and 90-day waiting periods to get the most for your money.
- How long do you want to receive benefits? You can choose how long you want to be covered. It's a good idea to cover yourself until retirement. It's possible to buy lifetime coverage, but these policies are usually prohibitively expensive.
- Does your life insurance policy have a disability rider? If you don't have enough money to pay for a private disability policy, you may be able to use your existing life insurance policy to cash in. Some policies have optional riders that allow you to access the death benefit in the case of a disability. It's worth looking into if you already own a policy.
It's time to protect your income by protecting your paycheck. Disability insurance can make all the difference for your family if you're hurt or sick and can't work.
➡️Wondering how to buy disability insurance? Call me today for a free quote!Schedule a Call
*MedicineNet.com, “What are the leading causes of disability?”, accessed 4/12/23
^SSA.gov, “Outcomes of Applications for Disability Benefits,” accessed 4/12/23
**DisabilitySecrets.com, “Short-Term Disability Benefits Available From State Governments,” accessed 4/12/23