If you are injured as the result of a car accident, it’s possible your car insurance carrier — or the carrier of the person who hit you — would pay you for lost wages, but it depends on the policy. Sometimes the insurer would pay you the difference between any disability payments you received and the full amount of your lost salary.
Myth No. 5:
The Government Would Pay Me
You might think if you were too sick to work that you could qualify for Social Security Disability Income. But only 39% of disabled workers who applied for Social Security Disability Income payments were approved in 2005. Even when they are approved, the average monthly benefit in 2007 was just $978, and it can take months to receive any benefits at all, said Tassey of LIFE.
“You can’t file for SSDI until you’ve been disabled for at least five months, and most people are denied the first time,” Tassey said. “Pragmatically, it’s likely that you will not get any money from Social Security in the first year.”
If you are not working, you are not contributing to your Social Security for retirement. And if you’re disabled and on Social Security, you won’t be able to save anything on your own for retirement.
How to Get Individual Disability Insurance
There are several ways to get disability insurance.
First, check with your employer. If it’s a large company, it may offer short-term or long-term disability insurance at no cost to you.
Be aware that if you have group coverage, you will lose that coverage if you leave that job, and may not be able to take it with you. Also, if that coverage is paid for by your employer, the government will take taxes out of any benefit you receive.
“If you are getting 60% of your pay through your employer’s disability coverage, be prepared to see them take 25% out for taxes,” said Matt Tassey, past chairman at the Life and Health Insurance Foundation for Education and an insurance broker with Burwell & Burwell in Portland, Maine. “That leaves you about 45% of your pay.”
However, you may have the option to pay for additional coverage — say increasing coverage from 50% of your salary to 70% — for a fee that would be taken out of your paycheck. That’s called supplemental disability insurance.
If your employer doesn’t provide free group disability insurance with or without the possibility to buy supplemental coverage, check to see if they have a disability benefit that you can voluntarily sign up for and pay for yourself. Premiums are usually deducted from your paycheck, and can be 10% to 20% less than if you had to buy it on your own. Also, you may be eligible for a higher level of coverage.
If you can’t get disability insurance through work, check with a professional organization. Many groups offer their members the chance to buy disability insurance through their group plan.
Finally, you can buy disability insurance on your own through an agent. You wouldn’t need to worry about losing coverage if you change jobs, and any benefit you receive would not be taxed.The downside of buying coverage on your own is it is likely to be the most expensive option.
Experts say disability insurance is more important than life insurance for many people. For instance, a 40-year-old man is almost three times more likely to suffer a long-term disability than to die, according to Unum, a disability insurer.
Terms to Know
Residual Benefits: The partial benefits you’d receive if your policy covered a partial disability.
Benefit Level: The percentage of income you’d receive from the policy; generally 40% to 65%. If the benefits are paid for by your employer, they will be taxed and the percentage you’d receive would be lower.
Benefit Period: The time the benefits would flow to you. It could be up to six months to about two years for a short-term policy; up to five years or until age 65 for a long-term policy.
Elimination Period: A waiting period before your disability benefits kick in. It can range from one month to six months after the disability occurs. Longer elimination periods mean lower premiums.
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