It happened when I was eight years old. I was sick, so I stayed home from school and spent the day with my grandparents. My mother brought my five-year-old brother and came over to pick me up at 4:00. She decided we should remain for dinner because it began raining. I was pleased that I could keep watching one of my favorite television programs.
While I was watching TV from the recliner, my five-year-old brother was peering out the window to observe the storm. Mom entered to turn off the TV, Grandpa entered to speak with me, and Grandma walked by me to pull him away from the window. It suddenly struck at that point.
A motion picture could not capture the tornado's tremendous and terrifying sound. I sat up, perplexed as it passed. I didn't know why it kept raining on me. I only noticed Grandpa; I missed everyone else. Mom screamed for my brother and me, breaking the awful silence. She emerged from the debris and got up in a bloodied mess. We moved toward the center of the house after locating my brother and our grandmother.
Everything for our family changed at that precise moment.
Mom cherished teaching. She taught special education in elementary school. She received a Master of Education degree from Wright State University shortly after graduating from The Ohio State University in less than four years. She had to have worked much harder as a teacher than as a student. Even at home, she was busy drafting IEPs or evaluating papers. Her career eventually came to an end after the tornado.
Mom suffered permanent damage. Her arm has a constant shooting pain that physicians believe may have been the initial cause of her developing multiple sclerosis. She couldn't keep working, no matter how hard she tried. Before the pain of her wounds finally overcame her, she battled through it for several years. Eventually, the fatigue of the disease was too much to handle.
Long term disability insurance provided our family with the replacement income needed to continue to live our lives, yet only 1 in 3 of the private sector workforce has long-term disability insurance. And our story might sound like one in a million, but of today's 20 year-olds, about 1 in 4 will become disabled before reaching age 67.
By protecting your paycheck with disability insurance, you are protecting your family.
Table of contents
Disability Insurance: The Basics
Disability Insurance: Short Term
Short-term disability insurance is a type of insurance that provides income replacement to individuals who are unable to work due to a temporary disability or illness. It typically covers a portion of an individual's income for a limited period, usually up to six months, although the exact terms of coverage can vary.
Short-term disability insurance is available for private purchase or as an employee benefit from an employer. It is intended to support people with their living costs while they recuperate from their medical condition and cannot work.
Disability Insurance: Long Term
Long-term disability insurance is a type of insurance that replaces income for people who are unable to work because of chronic or irreversible sickness or disability. Long-term disability insurance, as opposed to short-term disability insurance, typically covers an individual's income for a significantly longer time, usually several years or until retirement age, depending on the policy terms.
Long-term disability insurance is also available for private purchase or as a benefit to employees from an employer. It is made to assist people in paying their bills and maintaining their living level while they cannot work due to a disability or illness.
Disability Insurance Benefits
Disability insurance benefits are financial benefits paid to individuals who cannot work due to a disability or illness. These benefits are designed to replace a portion of the individual's income lost due to the disability, allowing them to cover their living expenses while they cannot work.
Social Security Disability Insurance Benefits
What is Social Security Disability Insurance?
Social Security Disability Insurance (SSDI) is a federal government program that provides financial assistance to individuals who cannot work due to a disability or illness. To qualify for SSDI, individuals must have a medical condition that is expected to last at least one year or result in death, and they must have worked and paid Social Security taxes for a certain amount of time.
SSDI provides monthly cash benefits to eligible individuals and access to healthcare through the Medicare program. The benefits paid are based on the individual's earnings history and the severity of their disability. SSDI is an important safety net for individuals who may be unable to work due to a disability and have no other source of income.
What is the Average Social Security Disability Benefit?
At the beginning of 2019, Social Security paid an average monthly disability benefit of about $1,234 to all disabled workers. That is barely enough to keep a beneficiary above the 2018 poverty level.
Can you solve the social security crisis?
If Congress doesn't address the social program's budget problems, pensioners will begin getting a lower payout in 2034. In other words, even though Social Security will still be around in 2034, seniors will only begin to collect 77% of their entire payment.
The PWBM Social Security Simulator allows users to build Social Security reform plans to see the impact of those plans. Click the image below to see if you can solved the Social Security crisis.
Where can I learn more about my social security disability insurance?
Employer-provided or privately purchased disability insurance
Short Term Disability Insurance vs. Long Term Disability Insurance
Short-term disability insurance can offer immediate financial assistance while a person is healing, and premiums are frequently less expensive than those for long-term disability insurance. The coverage duration is constrained, and if a person's illness or disability lasts longer than the coverage term, they might be unable to get any income replacement.
Long-term disability insurance, on the other hand, provides income replacement for a much longer period, often several years or until retirement age, for individuals who cannot work due to a long-term or permanent disability or illness.
Where can I purchase disability insurance?
Disability insurance can be purchased through various channels, including insurance agents, brokers, and online insurance marketplaces. Insurance agents and brokers are licensed professionals who can help individuals understand their disability insurance needs, compare policies from multiple insurers, and assist with the application process.
Online insurance marketplaces provide a platform for individuals to compare disability insurance policies from different insurance companies and purchase coverage directly online.
Disability insurance can also be obtained through employer-provided group plans, which may be available as part of employee benefits packages.
Individuals can also explore government-sponsored disability insurance programs, such as Social Security Disability Insurance (SSDI), which provides benefits to eligible individuals who are unable to work due to a disability.
Are disability insurance premiums taxed?
Whether or not disability insurance premiums are taxed depends on who pays them. If an individual purchases disability insurance with after-tax dollars, the premiums are not taxed.
If the premiums are paid for with pre-tax dollars through an employer-sponsored plan, they are typically considered taxable income when received as benefits.
If an employer pays for a portion of the disability insurance premium, the portion paid by the employer is generally considered taxable income to the employee.
Are disability insurance benefits taxed?
Depending on how the premiums for the insurance were paid, disability insurance benefits may or may not be taxed.
The disability insurance payouts received are not taxable if the policy premiums were paid with post-tax funds. This means that neither federal nor state income taxes, Social Security taxes, nor Medicare taxes apply to the benefits received.
The obtained disability insurance payouts, however, might be taxed if the policy premiums were paid with pre-tax money. In this situation, the benefits would be regarded as taxable income and be subject to federal, state, and Social Security taxes and Medicare taxes.
It's critical to understand that benefits from disability insurance coverage acquired through an employer-sponsored plan may be subject to different tax rules depending on the plan's specifics.
How much disability insurance should I get?
Deciding how much disability insurance you need can be a challenging task. As a general rule of thumb, the disability insurance cost for a long term individual policy is 1% to 3% of your annual salary. Here are some steps you can take to determine how much disability insurance you need:
Evaluate your current financial situation: Determine your monthly expenses, including rent/mortgage, utilities, food, transportation, and any other bills you may have, which will help you understand how much money you need to cover your basic living expenses each month.
Calculate your current income: Determine your current monthly income from all sources, including your job, investments, and any other sources of income.
Assess your coverage needs: Evaluate your employer's disability insurance policy to see what type of coverage you have. Determine how much coverage you need to replace your income if you become disabled.
Consider your health history: Consider your personal health history and any pre-existing conditions you may have. If you have a higher risk of becoming disabled due to health issues, you may want to consider purchasing additional coverage.
Think about your future goals: Consider your long-term goals, such as retirement, and determine how much coverage you would need to continue saving for the future if you were unable to work.
Consult with a professional: Finally, it may be helpful to consult with a financial advisor or insurance agent to help you determine the appropriate amount of coverage for your specific situation.
A common recommendation is to have enough disability insurance to replace at least 80% of one's income in the event of a disability. This percentage is often based on the assumption that an individual can reduce their expenses while they are disabled, whether the benefits are taxed, whether they receive other forms of income, such as Social Security Disability Insurance (SSDI) or workers' compensation benefits.
Can I use short-term disability insurance for maternity leave?
Yes, short-term disability insurance can sometimes be used for maternity leave. Short-term disability insurance policies typically cover temporary disabilities, including pregnancy and childbirth. They can provide income replacement for a period of time while a new mother cannot work due to pregnancy-related medical conditions or childbirth.
Disability Insurance Checklist for Married Couples
Evaluate your emergency savings
Experts recommend 3-6 months of expenses set aside for an emergency. However, the more saved for emergencies the less likely short term disability insurance is necessary, and the longer the elimination period can be for long term disability insurance.
Understand how much disability insurance you each have through work
Employer sponsored disability insurance commonly covers 40%-60% of your income for a certain period of time. Keep in mind that if you lose your job you lose that benefit.
Look into an individual disability insurance policy to cover a gap of insufficient emergency savings or employer sponsored disability insurance.
Also consider consulting the Social Security Administration to understand the process for collecting SSDI and your estimated benefit.
Myth buster: Workers comp is not disability insurance
Workers’ compensation is a government-mandated program that provides benefits to workers who become injured or ill on the job or as a result of the job.
Evaluate your budget
Make it affordable to protect your paycheck. Here are a few strategies to reduce the monthly cost of disability insurance:
Increase the elimination period length. The elimination period length is the waiting period before you can receive benefits after suffering an injury or illness. Think of it as a deductible paid with time, not money. The longer the elimination period, the less costly the premium.
Use savings and your spouse's income for short term disability needs. Experts believe that it’s more important to have a policy that will protect you for a significant period of time. And this was the case with our family.
Calculate the coverage you each need. The Disability Insurance Needs Calculator by Life Happens estimates the income you would need to maintain your current standard of living should you become disabled and unable to work.
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