A great deal of confusion exists regarding short and long term disability insurance. The problem exists with the use of the words “long term” versus “short term.” Some people think long term means it will take care of you forever, while others mistakenly assume it means nursing home care. In actuality, neither is true. article continued below »Individual, Disability Income Insurance can help preserve your family's income in the event you should become disabled. Our network professionals can help you find the lowest rates on a policy!
The easiest way to understand disability insurance is to think of it as disability income insurance or “income replacement” insurance, which is actually what it is. It does not pay a doctor, hospital or nursing home. Instead it provides you with up to about 75% of your income in the event that you should be come unable to participate in gainful employment.
Large employers usually provide group disability insurance on the job, although that practice is becoming less common each year. Again, if people have it on the job, they often mistakenly assume they have enough insurance. Employers generally provide short term and long term disability. The short term is simply sick leave. This is insurance that the employer carries, primarily to protect his own interests. If you are not on the job, your position must be covered and production levels maintained by other people. The lost hours are costly to your employer; the employer himself will not pay you for time that was not worked. Instead he will pay an insurance company to pay your salary for the number of days allowed by the plan. If you do use more days than the plan allows in a given year, your employer may decide that you are not a good risk and may simply dismiss you.
Long term disability is also purchased from an insurance company, frequently a different one than that providing the short term pay. This insurance allows your employer to provide you with a portion of your income while you recover from an accident or illness. It is assumed that you will return to work at the end of the disability period. The only exception to this occurs when a person becomes disabled close to the age when they would begin to draw social security. In these cases, the company may keep the employee on the payroll until social security payments and Medicare go into effect. It is not an arbitrary decision on the part of the employer, but rather is dictated by the specific terms of his policy.
Not all employers provide disability insurance. Of those who do, some provide sick leave only, leaving you to apply for Social Security Disability when you are no longer able to work. The existence of SSI gives people an additional false sense of security.
First while some individual disability insurance plans provide income replacement to those who are only partially disabled, most people who qualify for SSI must be unable to perform ANY gainful employment, including employment that might be available to them if they were able to relocate. The availability of a job in your area is unrelated to whether or not you qualify for SSI. And even if you are successful in getting SSI in a reasonable time, you can be sure that it will not replace your lost income.
Secondly, when a person applies for SSI, it usually takes from 2 to 4 years, and several appeals. While there are exceptions, it seems that the government’s idea is to refuse everyone the first time in hopes that you will just give up and go back to work. Alternatively, if you are seriously ill, there is always the possibility that you will die before your disability is granted. Morbid as it may seem, countless cases applicable to both these alternatives are on the books.
Even if you do eventually qualify for SSI, it can take so long that your family can be bankrupt before you get your first check. The problem is further complicated by the fact that if you are not working, you probably won’t have health insurance either.
The best solution to providing this often overlooked piece of security for your family is to purchase private disability insurance. You can find plans that pay for several years while you are waiting for SSI to begin. In some cases, you may be able to find plans that will pay continuously until your social security begins. Of course, your premium rates will be determined by the features of your plan. Unfortunately, your disability insurance payments will usually cease once you are old enough to collect social security, but at least your family will be protected while the children are young and the bills high.