Disability insurance garners little attention from most workers until they become disabled and they can no longer work. Insufficient protection from income loss, however, is a real concern for thousands of workers each year. In fact, the Social Security Administration (SSA) estimates that one in four of today’s 20-year-olds will become disabled before they reach the age of 67.
So what are your options if you become disabled and are unable to work? What are your options if the illness is short-term? What if you will be out of work for at least 12 months? Does the Federal Government provide disability insurance for both long and short-term disabilities, or is this something you have to purchase on your own?
These are all great questions but, unfortunately, most workers do not know the answers. Worse still, it's likely that they have underestimated the risk that they will become disabled and overestimated the money and resources they will have if they are unable to work.
Short-Term Disability Options
If you have become disabled with a short-term disability, which can be defined as any type of health impairment that will last less than a year, you will not be eligible for benefits from the Federal Government through the Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) programs. The SSA does not provide any type of short-term disability benefits for workers.
So if you cannot request SSDI or SSI disability benefits, what are your other options? It will depend on whether you were injured at work performing your normal job duties, you were injured due to the negligence of another person’s actions, or you simply suffer from a severe health condition.
1. Workers’ compensation benefits for short-term disabilities
If you were injured while performing work, your first option for disability benefits might be workers’ compensation. Many employers are required to purchase insurance to cover employees who are injured at their job performing their normal job duties.
Disability benefits that are offered to injured workers include benefits for temporary total disabilities, temporary partial disabilities, permanent partial disabilities, permanent total disabilities and disfigurement. Depending on the worker’s classification, they will receive wage loss replacement benefits. All injured workers will receive medical care benefits.
2. Filing a personal injury claim
Not all injuries occur at work. Other common injuries and resulting short-term disabilities may be a result of the negligence of another person. For instance, if you are injured in a car accident due to the negligence of another person, you will not be eligible for workers’ compensation, but you may be able to receive compensation for your injuries by filing a personal injury claim against the other driver or settling a compensation claim with their insurance company.
Personal injury awards, which can include lost wage and pain and suffering compensation, as well as payments for current and future medical expenses, can help offset lost wages while you are disabled and unable to work.
3. Voluntary insurance policies
Workers may also protect themselves from lost wages due to a short-term disability by purchasing an out-of-pocket voluntary insurance policy. Sometimes, these are offered through an employer or another insurance provider.
Voluntary insurance policies will help cover costs related to living expenses, such as rent, gas, groceries, babysitting and other necessities by providing a set monthly amount that is a percentage of your gross income. These policies can be used to cover the gaps that major medical insurance does not cover.
Long-Term Disability Options
1. Social Security Disability Insurance (SSDI)
SSDI is offered to disabled workers who have a disabling health condition that is expected to last for 12 continuous months and that does not allow a worker to perform substantial gainful activity.
Workers who have not worked and paid sufficient taxes to be insured for SSDI will not qualify for benefits. Benefits are not guaranteed. In fact, up to 70% of workers are denied benefits the first time they apply.
Workers who are approved, however, can receive a monthly cash payment to supplement their income. SSDI payments are paid to the worker until the worker is able to return to work, they are considered no longer disabled by the SSA, they reach their full retirement age, or they die.
2. Supplemental Security Income (SSI)
Another long-term disability option offered to disabled workers by the Social Security Administration is SSI benefits. SSI offers a monthly cash payment to workers who are blind, aged or disabled, and who are unable to work.
SSI recipients do not have to have work credits to qualify for SSI benefits, but they must have very limited income and resources. If a worker’s income or resource level is too high, they will be denied SSI benefits regardless of whether or not they are disabled, blind or aged.
3. Long-term individual disability income insurance
Another option to protect you from a long-term disability is to purchase long-term disability insurance. This option may be offered through an employer, or you can buy a policy directly from an insurance company.
Policies vary on how much they will pay, whether they will pay partial benefits, how soon after your disability begins they will start making payments, and for how long benefits will be paid. For instance, some policies offer income replacement of 50 to 70% of your income, and can be paid for a fixed number of years until you reach your full retirement age, or until you die.