Supplemental Disability Insurance: What It Is And When You Need It
No one plans to get sick or injured to the point where they cannot workbut it happens. And while many employers offer short- and long-term disability coverage to provide financial assistance during a period of disability, these benefits typically only cover a percentage of your income, not the whole amount.
This is where supplemental disability insurance coverage can step in, providing additional income beyond what your employer offers.
Why Supplemental Disability Insurance Makes Sense
If you have access to long term disability insurance through your job, youre one of the lucky ones. Most workers dont have this option. However, even if you have job-based disability insurance, you may not have as much coverage as you think. For many workers, it makes sense to secure supplemental disability insurance.
What Qualifies For Short
To qualify for short-term disability benefits, an employee must be unable to do their job, as deemed by a medical professional. Medical conditions that prevent an employee from working for several weeks to months, such as pregnancy, surgery rehabilitation, or severe illness, can qualify to receive benefits. Since employers in most states must legally provide workers’ compensation insurance to all employees, any injuries incurred on the job are typically covered under a workers’ comp policy and are therefore not eligible for short-term disability.
While most non-work-related temporary medical conditions are covered by a short-term disability policy, there can be exclusions for preexisting conditions or intentional and foreseeable injuries . While employees can qualify for time off under the Family and Medical Leave Act to care for a sick relative, most short-term disability policies would not provide benefits if the covered employee is not the one with the illness.
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Best For Customization: Guardian Life
With four policy types offered and a slew of riders and coverage options, Guardian Life is our preferred choice for customization of your disability insurance. Options include group policies and supplemental insurance coverage. To help you further customize your policy, you can choose between riders like a future benefits increase, guaranteed renewability, and student loan protection, allowing you to completely customize a policy according to your needs.
Variety of riders and policy options to choose from
Quotes are available online for some applicants
Discounts available for preferred occupations such as a 10% discount for physicians
Many applicants will need to speak with a representative to get a quote or purchase coverage.
Policies are not geared toward group plans and professional workers.
Medical exam likely required
Founded in 1860 and backed by Berkshire Life Insurance Company of America, Guardian Life offers a number of disability insurance options including long-term coverage. The company holds an A++ rating from AM Best.
Long-term policies can replace up to 60% of your income, with benefits lasting five years, 10 years, 20 years, or until you reach retirement. Some policies will allow you to renew your coverage beyond age 65 if you are still employed and not disabled. Every policy is different, but a typical elimination period is usually three months long.
Portable Disability Income Insurance
Another issue with work-based long term disability insurance is that it usually isnt portable. If you leave your job, you can lose your coverage.This can be a bigger deal than workers realize.
Underwriting Considerations. You might think that if you lose your insurance policy you can just buy a new insurance policy at that point, so theres no reason to worry about it ahead of time. Not so fast. This might be true when it comes to health insurance under the ACA, health insurers cannot deny coverage or charge higher rates due to pre-existing conditions but disability insurance is different. A disability insurance company absolutely can decide to deny coverage or charge higher rates based on the workers age or health conditions.
Lets say a worker is 30 years old and in great health. He gets long term disability insurance through his job, and he doesnt buy additional coverage. He works at the same company for 20 years. During that time, hes diagnosed with diabetes, hypertension and heart disease. Then when hes 50, he decides to take a new position at a different company. He loses his disability insurance, and his new job doesnt offer the benefit. He tries to buy individual disability insurance coverage on his own, but because of his health conditions, most insurers reject his application, and the ones that offer coverage want to charge higher rates than he can afford.
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Health Coverage For People With Disabilities
If you have a disability, you have three options for health coverage through the government.
Medicaid provides free or low-cost medical benefits to people with disabilities. Learn about eligibility and how to apply.
Medicare provides medical health insurance to people under 65 with certain disabilities and any age with end-stage renal disease . Learn about eligibility, how to apply and coverage.
Affordable Care Act Marketplace offers options to people who have a disability, dont qualify for disability benefits, and need health coverage. Learn about the .
Filling In Gaps With Supplemental Disability Coverage
Disability insurance replaces a portion of a workers income. It does not replace the workers full compensation.
When you think about the possibility of fraud, this makes sense. If a worker could get their full income level through disability insurance payouts, there wouldnt be much motivation to work. This could open the door to fraudulent and exaggerated claims.
At the same time, for workers with legitimate claims, the reduction in pay can be a problem. A long term disability insurance plan offered through work typically only replaces 60% of a workers income and thats before taxes.
If a worker is used to earning $100,000 in gross pay a year, during a period of disability, they might have to scrape by on $43,000 after taxes. Thats going to require a major lifestyle adjustment, even before you factor in the medical costs that normal accompany a disability. Any savings that the worker has saved can be drained fast.
The situation can be even worse for high income earnings because monthly benefit caps limit the amount a policyholder can receive. The higher the income, the bigger the disability insurance coverage gap.
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What Is Considered A Long
A long-term disability is an injury, illness, or medical condition preventing someone from working their usual job, at their usual pace, or making their usual income.
You might be surprised to learn that approximately 90% of long-term disabilities today are the result of an illness, not an accident or injury. This puts disability in the realm of possibility for any of us, no matter how young, healthy, or seemingly safe.
Long-term disabilities could include cancer, neurological or joint disorders, and asthma, to name a few. They could also include injuries, like those due to a fall or even a car accident.
If you have long-term disability coverage, it can protect your income for years, though you will need to wait until the end of your elimination period to begin receiving funds. This is why some people also carry short-term disability insurance these policies can have waiting periods as short as zero days, helping bridge the gap for you and your bank account.
Important Information About Disability Benefits
- You must be under a doctors continuous care.
- You must meet the applicable definition of disability for Basic, Voluntary Short-Term or Voluntary Long-Term benefits.
- Theres a 14-day waiting period before you can begin receiving benefits through Basic or Voluntary Short-Term Disability. However, youll need to use up to 22 sick days, if you have them, before benefits begin.
- Mental illness and substance abuse-related benefits are usually limited to a 24-month lifetime maximum through Voluntary Long-Term Disability Insurance.
- If your disability is related to a condition you were diagnosed with, or had treatment for, in the 90 days prior to your initial enrollment in Voluntary Disability Insurance and your disability leave begins within one year after your enrollment, you will not be eligible for Voluntary Long-Term Disability benefits for that condition. You will, however, be eligible for Voluntary Short-Term or Basic Disability benefits, and for Voluntary Long-Term Disability benefits for conditions that were not pre-existing.
- If you are receiving disability benefits through workers compensation, California SDI, Social Security, UCRP, or other sources, they will be coordinated with your Basic and/or Voluntary Disability benefits. In most cases, disability coverage from all sources combined can provide you with a maximum of 60 percent of your eligible earnings.
The Council for Disability Awareness, Disability Statistics, 2012
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Introducing A New Tool To Find Out What Issues Canadian Face With Their Insurers
The arrival of COVID-19 has pushed Canadians, more than ever before, online for finding and applying for insurance and banking products. It is not easy, though, to make the right choice without knowing if a particular insurer will be there when you need them the most. As the largest Canadian review platform with thousands of
What Is Disability Insurance
Disability insurance is there to protect you if youâre unable to work because of an accident, injury or illness. If you’re a small business owner, certain policies may also protect your business and reimburse any covered expenses incurred during your disability. This can help you avoid depleting your emergency fund or retirement savings if something happens.
This is where you might have questions. What qualifies as a âdisabilityâ? How much does a plan cost? How much income will it provide in case of injury? The answer is: it depends on the plan.
- As the name suggests, short-term disability insurance covers you in the event of a short-term injury or illness â typically 3 to 6 months. This type of coverage is required by employers in some states.
- Long-term disability policies cover longer terms, such as 2, 5 or 10 years. Many mid- or large-size employers offer long-term disability coverage via a group plan like health insurance, but you can get supplemental coverage through an individual plan.
- The government also offers Social Security Disability Insurance, but only to qualified individuals who meet a strict definition of disability and adhere to stringent requirements.
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Commonly Asked Questions About Long Term Disability
In general, its best to have enough disability coverage to replace 60% of your after-tax income. However, this number can vary on a number of factors, such as recurrent debt payments and monthly living expenses.
Use our Disability Insurance Coverage Calculator to find out how much coverage is right for you.
The length of time you can receive benefits depends on your policys Maximum Benefit Period, which is determined by your employer. Once the elimination period is satisfied and you continue to meet the definition of disability, your Long Term Disability Insurance benefits can extend through the Maximum Benefit Period.
The disability benefit may be reduced if you are receiving income from other insurance policies, retirement or government programs.
If You Want Customizable Benefits
Your employer-provided plan may not have a wide enough range of benefits and features, limiting your flexibility. Having your own supplemental insurance allows you to choose the coverage and benefits that work for you.
Keep in mind that if you want a higher coverage amount, longer-term benefits or a shorter elimination period, those features may raise your premium costs.
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How We Chose The Best Long
In creating this list, we looked at and compared more than 25 different disability insurers offering long-term coverage. In order to choose the best for each of these long-term coverage categories, we considered a variety of factors including the ease of obtaining a quote and buying a policy, coverage availability, price, financial strength ratings, and policy options.
We also looked at customization options and features available, which allow customers to really create the policy that best suits their and their familys needs.
Social Security Administration. “Disability Benefits,” Page 1 of PDF.
Information You Need To Apply
Before applying, be ready to provide information about yourself, your medical condition, and your work. We recommend you print and review the . It will help you gather the information you need to complete the application.
Information About You
- Your date and place of birth and Social Security number.
- The name, Social Security number, and date of birth or age of your current spouse and any former spouse. You should also know the dates and places of marriage and dates of divorce or death .
- Names and dates of birth of children not yet 18 years of age.
- Your bank or other and the account number.
Information About Your Medical Condition
- Name, address, and phone number of someone we can contact who knows about your medical conditions and can help with your application.
- Detailed information about your medical illnesses, injuries, or conditions:
- Names, addresses, phone numbers, patient ID numbers, and dates of treatment for all doctors, hospitals, and clinics.
- Names of medicines, the amount you are taking, and who prescribed them.
- Names and dates of medical tests you have had and who ordered them.
Information About Your Work:
- Award letters, pay stubs, settlement agreements, or other .
We accept photocopies of W-2 forms, self-employment tax returns, and medical documents, but we must see the originals of most other documents, such as your birth certificate.
Do not delay applying for benefits because you do not have all the documents. We will help you get them.
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Other Ways You Can Apply
Apply With Your Local Office
You can do most of your business with Social Security online. If you cannot use these online services, your local Social Security office can help you apply. You can find the phone number for your local office by using our Office Locator and looking under Social Security Office Information. The toll-free Office number is your local office.
Apply By Phone
If You Do Not Live in the U.S. Or One of Its Territories
Contact the if you live outside the U.S. or a U.S. territory and wish to apply for retirement benefits.
Mailing Your Documents
If you mail any documents to us, you must include the Social Security number so that we can match them with the correct application. Do not write anything on the original documents. Please write the Social Security number on a separate sheet of paper and include it in the mailing envelope along with the documents.
If You Cannot Rely On Social Security
You can apply for Social Security disability benefits if you cannot work due to disability or injury. However, this coverage is not always easy to qualify for, and the application process could take months. In addition, if you do qualify, you’ll have to wait six months before receiving any benefits.
Having supplemental coverage with a shorter elimination period can help you get coverage quicker than you might through Social Security. It also can bridge the gap while you wait for your disability benefits application to process.
The Disability Application Process
Whether you apply online, by phone, or in person, the disability benefits application process follows these general steps:
- You gather the information and documents you need to apply. We recommend you print and review the . It will help you gather the information and documents you need to complete the application.
- You complete and submit your application.
- We review your application to make sure you meet our for disability benefits.
- We confirm you worked enough years to qualify.
- We evaluate any current work activities.
- We process your application and forward your case to the Disability Determination Services office in your state.
- This state agency makes the disability determination decision.
To learn more about who decides if you have a disability, read our publication .
Once You’ve Applied
Once we receive your application, well review it and contact you if we have questions. We might request additional documents from you before we can proceed.
Look For Our Response
When the state agency makes a determination on your case, youll receive a letter in the mail with our decision. If you included information about other family members when you applied, well let you know if they may be able to receive benefits on your record.
Check The Status
You can check the status of your application online using your personal mySocial Security account. If you are unable to check your status online, you can call us 1-800-772-1213 from 8:00 a.m. to 7:00 p.m., Monday through Friday.
How Long Does Long
Even after coverage is approved, your long-term disability insurance benefits wont kick in until youve satisfied the waiting period requirement. For most policies, this is at least 30 days, though it can easily be 60, 120, 365, or even 720 days.
Once benefits start, they will continue until your predetermined benefits limit is reached. This is the period of time you chose when you purchased the policy, and can last for a specific number of years or through retirement. The longer the benefits period, the more youll pay in premiums for your coverage.
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The Basics About Disability Benefits
The SSDI program pays benefits to you and certain if you are insured. This means that you worked long enough and recently enough – and paid Social Security taxes on your earnings. The SSI program pays benefits to adults and children who meet our requirements for a qualifying disability and have limited income and resources.
While these two programs are different, the medical requirements are the same. If you meet the nonmedical requirements, monthly benefits are paid if you have a medical condition expected to last at least one year or result in death.