You’re covered by Social Security Disability, but it might not be enough. Did you know most people experience a disability at some point in their lives? It’s true. And, The Social Security benefit doesn’t kick in unless you’ve been on disability for a long time.
According to the SSA, a disability is one in which:
- You cannot do work that you did before;
- We decide that you cannot adjust to other work because of your medical condition(s); and
- Your disability has lasted or is expected to last for at least one year or to result in death.
If you want to supplement your government benefit, here’s what you need to know.
What Is Disability Insurance?
Private disability insurance is a contract promising to provide income for you and your family from financial hardship due to an illness or injury. Many employers offer some kind of disability coverage to employees. But, you can also purchase private insurance to supplement your basic guaranteed coverage.
According to Slater and Gordon, many people who are injured, and need disability insurance, often need to fight with the government to get them to process paperwork. Even private insurers can be a hassle, so it’s important to pick the right coverage and insurer so you’re not waiting for a claim to be processed.
Types of Disability Policies
There are two basic types of disability policies. The first is short-term disability. Short-term policies have benefits lasting a maximum of 2 years. Long-term disability lasts for the rest of your life. Employers usually offer short-term policies, with long-term coverage supplied either through an individual policy or through the Social Security Administration’s program.
Make sure you understand how the insurer defines disability, how and when benefits begin, how long they last, and what the promised dollar amount is. Each insurer sets different rules about this so it’s good to know before you sign up for any insurance.
What To Look For In A Company
A policy in force is more important than anything else. While true, there’s no reason to overpay for it. Buy from a company that makes good on its promises. Usually, some companies stand out as disability-focused insurers, like The Guardian.
Also, make sure you understand what an insurer means by “disability.” An insurance company calls the shots on these definitions, so this is a big deal. If you ever get too sick or injured to work, it’s the “definition of total disability” that will determine whether you’re deemed “disabled.”
Finally, always buy a residual disability rider. Some carriers sell this and some don’t. Most disabilities are illness claims, not accident ones. When most illnesses onset, they don’t hit you like you’d expect. The “curve” is usually gradually increasing until total disability. It takes time for a person to be too sick to perform the substantial and material duties of their job. Most successful people tend to fight their illness with the hope they can keep working. This is where residual disability riders are important. It lets the insurer to pay a portion of your monthly benefit while you keep working. You just have to show a portion of your income is lost, like 15% or 20% due to your illness.
Jude Hutchinson is a personal finance consultant that started her career in the insurance industry. She enjoys sharing her insights and expertise online through blogging.