What Is Disability Insurance and Who Is It For?

Disability insurance is social security insurance for workers that provides an income if they become sick or injured and are unable to work.

The purpose is to provide short- or long-term monthly revenue as compensation to people who are not able to work due to a significant illness or injury.

The disability benefit could be based on how much the person made and how much of the insurance period had passed up to the point of the unwanted event.

In today’s article, we’ll discuss disability insurance in detail, so keep reading.

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    Are You Planning For Your Future?

    Money growing

    If you are working, you are planning your retirement. Aging slowly, you know retirement will come, and then benefits will kick in.

    You weren’t investing in social security for anything, right?

    There’s nothing wrong with not paying social security. Combining retirement benefits with savings, you and your family will have enough to enjoy old age.

    But what if the unexpected happens and you become disabled, not in a position to earn a paycheck, and left without income or any support?

    Yes, no one ever plans a future like this. Dreaming about happy days with your spouse, having fun with your grandchildren, and showing off some gray hair is way better.

    But that’s exactly where the problem is.

    CDC Statistics on disability in the United States
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    The statistics are relentless. One in four workers in their twenties doesn’t get to full retirement age and can still work. One in four will have to find another way to get the monthly income needed for a decent living.

    So, what happens if you are the one who wasn’t lucky enough to stay fit for a job until eligible for the old age pension?

    Why Should You Consider Disability Insurance?

    Your ability to work, earn a living, and provide for your family members and thus contribute to the national economy is one of your most important assets.

    Illness or an injury may impair your ability to work long before the full retirement age and leave you not just without the already limited income but also with expensive medical bills, forcing you to spend your savings in a way you never planned to.

    What Counts as Disability for Work?

    A person has a disability if they can’t do much work that pays them money or if their illness or injury may result in death.

    What if You Don’t Have Disability Coverage?

    A disability period may last for a couple of weeks or months, but it may also make you unable to work (do substantial gainful activity – as you will often see written) for the rest of your life. Insurance coverage may include physical illness, mental impairments, injuries, or other health-threatening cases.

    Unfortunately, many disabled workers do not take advantage of the opportunity to protect their limited income by enrolling in insurance programs and cannot receive disability benefits.

    You Need Insurance to Protect Your Assets

    The main goal of social security and supplemental security income programs is to help you feel safe by taking care of expected and unexpected health problems.

    Disability benefits can’t make up for all of a worker’s lost income, but they do make the future less uncertain.

    Health Insurance vs. Disability Insurance

    Health and disability insurance, along with pension and unemployment insurance, are all part of social security. Health coverage aims to provide benefits in the event of illness.

    Health insurance or health coverage may pay for all or part of your medical bills and/or give you access to Medicare at certain medical facilities you couldn’t afford or get to otherwise.

    Also, it is not intended to give you money every month but rather to assist you in paying for the necessary care. Also, it may offer long-term care services.

    On the other hand, disability insurance covers the lost income for workers and their families if the worker is not expected to return to work for a certain amount of time (usually at least one year) or even not to return at all.

    So, when you are suffering from a severe, medically determinable physical or mental impairment that is expected to last for a certain amount of time and, for that reason, you cannot work, you may be eligible for benefits.

    Eligibility Criteria

    A disability policy may not be as easily accessible to everyone as it may seem.

    To check social security disability insurance eligibility, the first thing that comes to mind is to visit your local social security office and ask for assistance.

    Social Security Administration Runs the program

    The Social Security Administration offers some insurance plans, suitable for your age, profession, work history, income, and medical condition. There are also supplemental security income disability programs that are a part of the Federal government.

    To get the appropriate assistance and the most accurate assessment, you may need to provide basics about your occupation, income, and tax records, as well as health care coverage, your medical records, and records of social security insurance, social security benefits, or social security taxes you already have a history of.

    After all the information is taken into account and processed, you would be given an estimate of the insurance benefits you might get if the insured medical condition happens

    Yes, you’ve read correctly. Not only that you and your background would be thoroughly tested, but in the end, you’ll probably realize that you won’t be getting what you were hoping for.

    But, you can be covered for disability, without the medical exam requirement. If you already have some health issues, you may be limited in choosing the right insurance. However, there is a large number of life insurance policies with no medical exam you can consider. 

    The Cost of Disability Insurance

    Key factors that affect the price of disability insurance
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    Depending on the programs selected, you may pay between 1% and 3% of your gross income every month. Of course, premiums are decided not only according to how much you earn but also how risky your work is in terms of health endangerment.

    Smokers also tend to pay more, even up to 25% more, compared to non-smokers of the same age and similar professions. So, your premiums may be more or less expensive depending on how old you are, what you do for a living, and how you live.

    Yes, software developers, firemen, industrial alpinists, airplane pilots, preschool teachers, cooks, lawyers, miners, or rock stars have very different occupational hazard risks, and that’s why their insurance premiums may also be very different.

    So, the price is not that cheap, is it? And, not just that. The only way to get something out of the money you spend on insurance is to become eligible for benefits, which means becoming disabled.

    You do not really like that, for sure. As was mentioned, 1 in 4 workers becomes disabled and therefore eligible, which means that 3 out of 4 disabled workers who pay for Disability Insurance never actually get anything out of it, except for the partial sense of being covered if the unwanted happens.

    Disability Benefits

    disability insurance benefits listed out
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    The disabled worker benefits aren’t meant to completely replace the wages employers used to pay before an insured event happened. Instead, they are meant to ensure the person has enough money to live well and has social security or supplemental security income even if they can’t work.

    The Center for Retirement Research at Boston College did a study that found that social security disability insurance benefits replace, on average, 50% of the earnings. Another interesting data is that spending on public disability benefits as a share of the total economy, or gross domestic product, in 2019 was 1.0 percent in the United States.

    As you can see, you may need more than the benefits from the most common insurance plans to keep your previously acquired living standards.

    And there is more: a five-month waiting period before receiving your SSDI benefits if the SSDI eligibility is positive. The good news is that you can apply for the benefits online, which makes it easier.

    Whether you apply online or visit the local office of the state agency, you will undergo the same criteria and receive the same treatment.

    This means you would receive your first payment in the sixth full month after the date your disability began. If you meet the nonmedical criteria, monthly benefits will be paid.

    Policies may offer short-term and long-term disability benefits to their employees. A short-term policy helps you immediately after an incident, and a long-term policy helps provide financial protection for disabilities that can last for years or help your family if it might result in death.

    Short-Term Benefits

    A short-term policy usually has short waiting periods, so the people receiving disability benefits can expect them in just 7 or 14 days after the event, lasting anywhere from a few weeks to several months. Most programs limit short-term benefits to no longer than two years.

    Long-Term Benefits

    Long-term benefits start after the short-term benefits coverage is fully paid out and may last from a few years to the rest of the insured individual’s life.

    Is Social Security Disability Insurance The Best Option?

    The average benefit offered by the Social Security Administration is not that favorable. Paying premiums will strain your monthly budget, and the benefits you can expect if your health is compromised won’t give you the comfort you are used to.

    The social security benefits always fall short of worker’s earnings, and if you don’t get them at all, you may end up feeling that your money was spent for nothing and that you would do better if you were to save it in the bank for all those years you were working.

    Percentage of income social security replaces for a 65-year old in 2020
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    What Wealth Nation offers is whole life insurance, which gives you not only security in unwanted life events but also helps you build an independent financial system. 

    Let’s provide you additional information to see why this is the best option:

    But there’s more…

    What about the generous death benefit? If something happens and your health deteriorates quickly, your family members will receive the death benefit to cover funeral and other expenses.

    Final Thoughts

    The whole life insurance policy will help you build your own financial system and a carefree life, independent of banking and agencies. 

    You will maintain control of your savings and your financial stability. Best of all, at the same time, you’ll have many tax privileges discussed in more detail in a previous blog about the tax benefits of whole life insurance