I often encounter
people who are unsure if they need disability insurance. “It’ll never happen to
me” is a common mindset.
But any individual
who works, regardless of whether they’re 21 or 60, on the coasts or working in
the Midwest, male or female, workers need this safety net to protect their
earning power. According to the Social Security Administration’s (SSA)
estimates and a 2018 U.S. Centers for Disease Control and Prevention survey, one in four people will experience a severe disability before
reaching retirement age.
The good news is
that you have options: Social Security Disability Insurance (SSDI) and
long-term disability (LTD) insurance.
Let’s take a look
at the latter. About one-third of workers have access to employer-provided LTD
insurance coverage, but for those who aren’t so lucky – especially gig workers
who have no benefit plans – plans can be purchased by individuals from private
insurers. These plans can be pricey, but when you consider how much time and
money people put into their careers, this can be a smart decision that protects
assets and investments.
How long LTD
coverage lasts depends on an individual’s ability to perform their most recent
job, or any other work outside their occupation. For example, LTD benefits for
mental/nervous disabilities usually last up to two years, but other types of
disabilities can be covered until age 65 or retirement age, depending on the
specific policy, unless an individual’s health improves.
If an employer
doesn’t offer LTD coverage and a former worker can’t afford to purchase a plan
on their own – there is a federal benefit most people have paid into their
entire working career via FICA taxes: SSDI. About 8.5 million former workers
currently receive monthly income through this program.
To qualify, individuals
must have worked for five of the past 10 years and be below full retirement age
(65-67). They must have a severe physical or mental impairment that prevents
them from working and is projected to last at least 12 months (or is terminal).
These conditions may include an injury or chronic illness. Because the SSA’s
requirements can be complicated to understand, many people take an online assessment before
beginning their SSDI application.
Those who qualify
should apply early, as the application process is extremely lengthy and
complicated. It’s estimated that by September 2020, about 700,000 people will
be waiting at the initial application level, where it can take three to five
months to receive a decision – assuming you are not denied, which happens in
two-thirds of cases.
If denied, the
subsequent appeals levels can lead to a hearing, where your case is presented
to a Social Security administrative law judge and can take 500 days or longer
to complete. For a small number of disability applicants, there may be relief
with the SSA’s “compassionate allowances” program. This program covers about
225 severe conditions – including some cancers and heart disease – allowing
one’s disability benefits application to be fast-tracked.
For those whose
applications are approved, SSDI provides income replacement for those who can’t
work as well as:
·
Medicare coverage, beginning 24 months after SSDI benefits start
·
Annual cost-of-living adjustments (COLA)
·
Dependent benefits
·
Protection for Social Security retirement benefits because of a
records freeze
·
Free support with returning to work through the Ticket to Work program for
those who are medically able
At the end of the
day, it pays to be prepared – no matter how healthy or even just lucky you
think you are. Everyone can benefit from a disability insurance policy in case
the worst occurs, whether that means looking into LTD, if you don’t already
have it, or exploring the SSDI application process. If you’re struggling with a
disability now or want to protect yourself from the financial impact from
future health conditions, there’s no time to waste.
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