Six Things You Need To Know About Employer
Long-term disability insurance is one of the many benefits you may be entitled to from your employer. This type of insurance can provide you with a steady income in the event injuries, illnesses, or chronic health conditions prevent you from working. Unfortunately, just because a policy is in place, it does not mean obtaining these benefits will be easy. The following are six important things employees need to be aware of:
Employer-provided long-term disability policies have very specific eligibility requirements. These include time limits in regards to length of employment and exclusion of workers in certain positions. Under the Employee Retirement Income Security Act of 1974 , you have the right to be provided with all policy related documents, free of charge and at your request. Review these documents carefully to determine if you are indeed eligible for benefits.
Even if you are eligible for long-term disability payments, your condition may not be covered. There may also be so variance in how the insurer defines disability. Generally, a disability is any type of physical or mental health condition that prevents you from performing tasks at your specific job. Some policies have provisions that specify your condition must prevent you from performing any job to be eligible.
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Long Term Disability Insurance Denial: What Should You Do
Work with a broker to help reduce your chance of denial for long-term disability insurance. Since brokers work with a variety of carriers and have access to preview the applications, they know which policy is most likely to result in a successful outcome for you. If you do not qualify for traditional long-term disability coverage, your broker can discuss the other insurance options open to you.
What Alternatives Are There To Short
The best alternative to short-term disability insurance is to self-insure with an emergency savings fund. Most financial experts suggest that you have an emergency fund of anywhere between three and six months salary anyway, which, combined with an LTD policy, can easily cover you during a disability.
However, if you donât have that emergency fund, or are in the process of building up your fund, then an emergency fund may not make sense as an alternative to STDI. If you receive short-term disability benefits from an employer, and they pay 100% of your premiums or the cost is relatively low, it may make sense to have an emergency fund plus and STDI policy. That way, your emergency fund can be saved for other purposes, like home repairs or medical emergencies.
The federal government does not supply any kind of coverage for short-term disabilities. Social Security Disability Insurance, or SSDI, is designed to cover long-term disabilities. Additionally, acceptance rates for SSDI are low, and if you have the means to cover yourself with private insurance, you should.
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Is The Disability Insurance I Get Through My Employer Enough
Clark Howard says getting disability insurance through work is acceptable for most people.
However, we should note that one of the big drawbacks with group policies through an employer is that they lack portability. That is, you cant take your disability coverage with you if you switch jobs.
For that reason alone, you may want to consider buying your own disability coverage away from your current employer. What you dont want is to find out that youre uninsurable because of age or sickness when you suddenly decide you do want to get disability coverage down the road!
Another consideration with group policies is the tax angle. When your employer pays the premium, as is often the case with group policies, the benefits are taxable. So that ultimately reduces your benefit when you need to file a claim.
If, however, you purchase your own policy, then the benefits arent taxable. You receive the full monthly benefit tax-free.
Group Long Term Disability Insurance
The term group long-term disability refers to a policy sponsored by an employer or association . Group coverage ends when you leave your employer or association. There is, on most group policies, a limited timeframe where you can convert the coverage to an individual policy. In many cases you can do this without a medical exam, so if you need to do a conversion, make sure you do so promptly.
Which Do I Need: Need Short Term Disability Insurance Or Long Term Disability Insurance
There are a few things to keep in mind when choosing disability insurance. First of all, do you have an emergency savings fund that could cover your expenses for a few months if you lost your job or were unable to work? If not, short term disability insurance is an essential financial protection, even if you are disabled for only a short period of time. If you have significant emergency savings on hand, though, you may focus on how a long term disability could impact your financial wellbeing and your retirement plans. If you were permanently disabled, could you cover your expenses until retirement? If not, look into long term disability protection.
No Empty Nursing Homes
Statistics show 70% of those over 65 will need long-term care. Odds are high for a married couple over 65 that one or both will need help at some point. Currently, 1.4 M Americans are in nursing homes. This isnt a tiny issue.
At annual costs approaching 100K per year, you can be wiped out in short order. Plus, costs are rising.
Be nice to your children. After all, they are going to choose your nursing home.-Steven Wright
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# 1 Financially Independent
If you can afford to self-insure a risk, it is always cheaper, on average, to do so. There are costs of insurance, including commissions and profit and so an insurance company always takes in more in premiums than it pays out in benefits. If you are financially independent, you are no longer depending on your income as a physician, and so no longer have an insurance need. It’s very reasonable to drop a policy at that point.
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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 and/or purchase coverage
Elimination periods can last up to 720 days
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 3 months long.
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Long Term Disability Insurance For The Self
There are several options for disability insurance for the self-employed. You can purchase your own policy, and you may qualify for Canada Protection Plan-D if you have contributed to Canada Protection Plan as a self-employed worker. Low-income self-employed individuals may qualify for program such as ODSP. EI sickness benefits are also an option, but only if you have paid into the program.
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“This is a really critical safety-net benefit,” says Rich Fuerstenberg, a senior partner at human resources consultant Mercer.
If you become disabled because of accident, injury or illness, long-term-disability insurance typically pays 50 percent to 60 percent of your income, while you’re unable to work. The length of time the policy pays varies some policies pay until you reach age 65.
Many long-term-disability claims are for chronic problems such as cancer and musculoskeletal conditions. According to the Council for Disability Awareness, the average duration of a claim is nearly three years 34.6 months.
Not everyone has savings to support them through that time. In 2015, when the Federal Reserve Board surveyed adults about household economics, 53 percent said they don’t have a rainy day fund that could cover them even for three months. More troubling, nearly half of respondents 46 percent said that faced with a hypothetical $400 emergency expense, they don’t have the cash to cover it.
According to the Social Security Administration, 1 in 4 people who are 20 years old now will be disabled before they reach age 67.
However, as employers continue to shift the cost of various benefits onto workers’ shoulders, long-term-disability insurance is no exception. Increasingly, they’re offering the coverage as a “voluntary” benefit, meaning employees pay the entire premium.
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What Is Disability Insurance And Should I Buy It
Lets say you suddenly fell ill or sustained an injury that prevented you from working and earning a paycheck. Would you be able to keep yourself afloat with the money in your emergency fund for three months, six months, 12 months or even longer?
If the answer to that question is no, then you need to think about getting a disability insurance policy in place.
How Much Does Long Term Disability Insurance Pay
Your policyâs benefit amount determines how much you will receive in long term disability benefits if you become disabled.
In most cases, your benefit amount will be a percentage of your income. The size of your disability insurance benefit amount will depend on the policy. Generally, long term disability policies can replace anywhere from 60 percent to 80 percent of your income.
In addition, many policies replace the income that is lost if you have to take a lower-paying job due to an injury or illness.
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Why Your Employer Sponsored Long Term Disability Plan Isnt Enough
If you rely on commissions and bonuses as your main source of income, your Long Term Disability plan may not be enough coverage to support you and your family.
Your income is your greatest asset. Protect it.
If youre an incentive-based earner your income is more like a reward for working hard than an expected paycheck. Insurance carriers treat your commissions as taxable income and cap the monthly disability benefits you receive.
Dont let your hard-earned income go uncovered. If youre a high earner IDI is a must have supplement to your standard LTD. IDI covers income from profit sharing to bonuses, so you dont miss out on the financial benefits youre entitled to.
Why do I need disability insurance?
Most people have a list of expenses they pay on a regularly scheduled basis. But who pays the bills when youre not getting paid? Social Security Disability Benefits dont always cover you when you arent working. In fact, these benefits may not be available to you at all if you are expected to be out of work for less than a year.
If you have a family that counts on your paycheck, or if you alone rely on your income for personal expensesyou need disability insurance. Because when you get diagnosed with a qualified disability, you should be focusing on your personal recovery, not your personal finances.
What if I already have disability insurance through my employer? Shouldnt that protect me?
How is IDI different than long-term disability insurance?
Social Security Disability Insurance
SSDI is a government-sponsored disability insurance program that is included in your Social Security benefits. However, it has a number of limitations, starting with the fact that paying Social Security taxes doesnt automatically qualify you for coverage. You also have to earn a sufficient number of work credits, which are based on your total yearly income. Forty credits are needed to qualify, but you can only earn up to four credits each year, so generally speaking, it takes 10 years to qualify. With an LTD policy from a private insurance company, you qualify for benefits when you make your first premium payment.
SSDI also has a strict any-occupation definition of disability that covers a specific and limited set of severe medical conditions listed in the Social Security Administrations Blue Book. The program only pays benefits for long-lasting or permanent medical issues that make you incapable of doing any work of any kind. The process for claiming SSDI benefits is also notably stringent: The initial application requires extensive documentation and can take months to complete and about 2/3 of these claims are rejected. 10 While the initial decision can be appealed, the process can stretch out for quite a while. If your claim is accepted, youll find that the average monthly benefit is slightly over $1,000.10 Since thats not enough for most people to live on, experts say you shouldnt rely on SSDI alone for disability insurance protection.
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Where To Buy Long Term Disability Insurance
Long-term disability insurance is available from agents, brokers, and directly from insurance companies. The advantage in using a broker is that they shop the market on your behalf to find the best policy for your unique situation. Brokers are compensated by insurance companies, but brokers are not tied to any one company. This means their services are free to you and they are free to work with as many different companies as possible to give you the best range of options.
Waiting To Buy Ltd At 45
Now lets look at the same scenario, but this time around Melanie waits until shes 45 to shop for LTD insurance.
Melanie decides in her 20s to forego a long-term disability policy right nowshes still got student loans to pay off, and she hasnt exactly met her earning potential yet. She makes a promise to herself that when shes older and better able to afford a monthly payment, shell buy some LTD coverage.
At 29, the same health scenario plays out: diagnosed with Crohns, periodic flare-ups through her 30s, surgery at 40, complications that prevent her from working for 6 months, and employer-sponsored short-term disability for the first 90 days. After those 90 days end, Melanie taps into her savings to cover the remaining three months that shes out of commission.
That three-month stretch without any income, and with the burden of unexpected medical expenses in addition to her regular bills, knocks her retirement savings strategy off course a little, but the damage isnt too severe. She figures she can get back on track by tightening her budget a little over the next couple of years.
Finally, in our examplewhich uses actual quotesif we assume Melanie keeps the policy until she turns 65, she would save about $7,500 in premiums if she buys when shes 25 instead of 45. Not only that, but shell have saved herself from some big expenses from the medical issues she faced in her mid-30s.
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Did You Provide Well Enough
And what will happen to your spouse after you spent the family fortune on your long-term care? This could happen and often does. Especially when the breadwinner is male.
He may feel they have plenty of resources, but after long-term care expenses, there may not be much left. Women tend to outlive men. And they are three times more likely to end up in a nursing home. How will the surviving spouse pay?
I bet you are terrified. Ready to buy?
Hold your horses! You may want to reconsider!
How To Choose A Long
There are a few key factors to consider when youâre comparing different companies and policies:
Price: Every insurer has its own way of measuring risk, so you may get more competitive rates from one company than others.
Riders offered: Not every company sells every disability rider. Make sure your top choice also offers all of the features you want.
Service and ratings: Consider a companyâs customer service ratings and other details like whether you can manage your policy online.
Everyone should consider including long-term disability in their insurance plans. Itâs particularly important if your family counts on your income or youâve put a lot of time and money into a career and don’t want to risk losing that investment.
Getting a policy is simple: work with an independent agent to compare quotes, fill out an application, and go through a simple medical exam to secure a policy and protect your earnings.
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Cost Of Living Benefits
Cost of living benefits are not included in most policies. Adding this rider is definitely something you will want to consider when making your choice regarding disability insurance. Cost of living benefits are meant to provide financial stability by offering an increasing benefit.
When choosing cost of living benefits, consider choosing one that increases on a compounding basis. Compound interest is earned on the principal and the interest. This additional rider can help your benefits keep pace through inflation even after your disability.