What is Social Security Disability Insurance

All working Americans participate and are covered in a long-term income protection insurance program. Social Security Disability Insurance (SSDI) and it is a federal program mandated for all working Americans who suffer a long-term disability. The program defines disability as, “Your condition must significantly limit your ability to do basic work such as lifting, standing, walking, sitting, and remembering – for at least 12 months.”

You may read that sentence and think “Awesome,  I’ve got insurance, I’m going to close this and go binge Game of Thrones” but we wouldn’t recommend that because as fantastic as it is that we have access to this program, it’s notorious for being incredibly hard to obtain. Just to qualify for the program you need to “…have worked and paid into the program (payroll taxes) for five of the last 10 years.” To learn more about the work credit system from SSDI check out this description on the Social Security Administration website.

Let’s say you are hurt or sick and you’ve been working long enough and you’ve decided to apply for Social Security Disability Insurance, this is where it gets frustrating. Just for your initial claim, it can take anywhere from 3-5 months to get an initial decision and 68% of people filing initial disability applications are denied.

Ok, so you were denied on your first attempt, the good news is that you can appeal the decision! The bad news is that the appeal could take up to 5 months. There is a 2nd appeal where you would have to go in front of an Administrative Law judge but even there, it can take up to 600 days to obtain a hearing.  In all, it can take up to four years just to get a decision. Plus, benefits under SSDI are taxable since they are paid for with using the payroll tax. All that time, you’re not working, not earning an income. Now imagine you’re doing that all on your own. It stresses me out just writing it, let alone going through it.  

The program was designed to provide subsistence level benefits in the event of a serious and long-term disability, not to insure your lifestyle or hard earned savings.

We’re not saying all is lost because we are lucky enough to potentially have access to this program if we are too sick or hurt to work, but we think it is important that you understand that if the worst case scenario does occur in your life, it may be some time before you are able to obtain these benefits.

That is why we included a Social Security Disability Insurance Assessment and Advocacy Benefit in our Income Protection Insurance Policy because as your benefits are coming to an end, we want to make sure our customers are in good hands with experts who can help advocate for them in the next stage of their lives.

If you have any questions regarding SSDI or Income Protection Insurance, in general, do not hesitate to contact our help desk.

Sources:

Social Security Administration – Benefits Planner: Disability | How You Qualify

True Help – Social Security Disability Insurance FAQs

NPR – Long Waits And Long Odds For Those Who Need Social Security Disability

How Much Does Short-Term Income Protection Insurance Cost?

“How much does Disability Insurance cost” is the second most asked question our customer service team receives and it’s met with the single most unsatisfying answer of all time. – It depends.

We know! And we told you it would be deeply unsatisfying. “It depends” is a horribly vague term for what’s going to be a long answer. We’ll try simplifying it by using the same format we used in our last post about “Insurance Coverage If You’re Already Sick or Hurt,” one short answer and one longer, more in-depth answer, to help give you all the knowledge necessary to make an informed buying decision.

Short Answer:
The price of your monthly premium generally depends on your age, the amount of coverage you buy, the type of work you do, the amount of time you’re willing to wait for your cash benefits to kick in after filing a claim (elimination period) and the amount of time you want your benefits to last (benefit period.) Generally, individual buyers spend between 1-3% of your salary on income protection insurance.

Longer Answer:
Think of the monthly cost of a short-term disability insurance policy like turning on a faucet. The more or less you turn your faucet is the amount of water you let out. Let’s go through the list together:

Coverage Amount
Consider this, how much money do you need each month to cover your fixed expenses like rent and groceries? The number you come up with should be your basis for the amount of coverage you need or the amount of income you need to insure in case of an unexpected illness or injury. The amount you pay for an income protection insurance policy can be higher or lower depending on the amount of your income you need and can afford to insure.

Elimination Period
If you have health insurance, you have probably heard the term deductible which is the amount of money you need to pay before the insurance company will begin providing benefits. In Income Protection Insurance the Elimination Period is the amount of time, in days, you need to be disabled before the insurance company will begin providing benefits. The longer you’re willing to wait for your benefits to kick in, the lower your monthly premium will be. The decision on whether to buy a policy that has a shorter or longer elimination period all depends on your own unique financial situation and risk tolerance.

Benefit Period
This is a fancy term for how long you would like your benefits to last in case you become hurt or sick and can’t work.  Typically, a short-term income protection insurance policy provides you benefits for up to 6 months to 1 year which is perfect if you do not have the savings available to you to cover your expenses. The amount of time you want/need benefits to last depends on your unique situation. Make sure to consider the benefits you already get from your job and how much money you have in savings before committing to a policy. Place note, that individual policies that you pay for provide tax-free benefits. Benefits provided and paid for by your employer are typically subject to federal and state taxes.

Age
Statistically, you’re more likely to lose income due to an unexpected illness or injury when you’re older, there’s no way around that. If you’re older and trying to buy income protection insurance, typically, you’re going to pay more, sad but true.

Your Job
The work you do also plays a part in how much your monthly premium will cost. Typically, someone with a low-risk job, like an office worker who works behind a desk all day, has a lower monthly premium compared to someone of the same age who works on a crab fishing boat in the Bering Sea. The more risk associated with your job and the more physically demanding it is, the more you’ll typically pay on your monthly premium.

At the end of the day, there are other factors that can impact your overall monthly premium including your height and weight, your overall health and whether you smoke, but knowing and understanding these 5 factors can help when you are considering what kind of Income Protection Insurance is right for you and how much you buy.

It’s also good to note that most workers are eligible for a long-term disability Program call Social Security. We pay taxes out of each paycheck for this long-term disability program. It is called a long-term disability program because benefits could last until age 65. But (and we’ll get into this in our next blog post) it can also take a long time to actually be approved for benefits under the program. Social Security Disability Insurance is intended to cover serious disabilities resulting in permanent impairments to your ability to earn a living because of an illness or injury. It can take a year or more to get Social Security Disability Insurance benefits.

If you have any questions or comments drop us a line here or contact our help desk, we’d love to hear from you.   

What If I’m Already Sick or Hurt & Want to Buy Income Protection Insurance (also known as Disability Insurance)

Photo by Eunice Lituañas on Unsplash

In this series of posts, we’re going to shed some light on some of our most asked questions about our Income Protection Insurance Policy (disability insurance.) We want you to understand Income Protection Insurance so you can make the best buying decision for your situation. So, without further fanfare, the #1 most asked question to our customer service team.

“I’m having surgery next week and will be out of work for 8-10 weeks. I would like to buy short-term disability to cover the time I’ll be out, what can you offer me?

Short Answer:

A short-term disability insurance policy would not cover you for an injury or illness that you already know about or a doctor has diagnosed. Any immediate illness or injury you know about before you buy your policy is viewed as a pre-existing condition. A policy will only cover you for unexpected events after you buy a policy.

Longer Answer:

One of the topics we’re going to cover here is how an insurance product is priced. This is only part of the story and we’ll get in to it a little more in depth in another blog post, but for today, what we’re going to get in-depth on is why a disability insurance policy does not cover an illness or injury you may be facing when you want to buy a policy.

As we highlighted in our last post about disability insurance and pregnancy, insurance products are created to help a person cover a risk she has in her life. A risk, as defined by the Merriam-Webster Dictionary is the “possibility of loss or injury”. The key word in that definition is “possibility” or the chance something will happen in the future. If there is an illness or injury suffered in the past, even in the recent past, that leaves ongoing physical or mental effects is pre-existing and is no longer a possibility, but a certainty. Insurance products are created to spread the risk of something happening across a whole group of people that an event might happen to.

When a Disability Insurance Policy is created and priced, a team of actuaries scours through loads of data to try to figure out what someone’s percentage chance of getting hurt or injured in the future based on factors like age and the type of job she does, to name a few. Based on that data, a price is created that creates a delicate balance between making the product affordable for someone to have, allow the company to cover overhead expenses, and reserve money in case the policyholder must file a claim for benefits. The amount a company needs to cover a person’s claim is spread out over, potentially, years of premium payment, with the assumption that something bad won’t happen to you, but if it does, the money collected by all its customers will be more than enough to cover 1 person’s claim.

This isn’t unique to Disability Insurance; all insurance is meant to cover a future risk. For example, you can buy life insurance to offset the risk that you pass away early and leave your family in a financial bind. If a loved one tried to buy a life insurance policy shortly after a death in the family, it would not be covering a risk, but a definite event and there can be no price high enough to cover definite events.

That’s why, if you already have an illness or injury, buying a disability insurance policy can’t help with that situation. Disability Insurance policies are created to ease the risk of illnesses or injuries in the future, not definite events that are currently occurring.

Do you have any questions? We’d love to hear from you. Leave a comment below or contact our Help Desk and we’d be happy to talk.

Regular Childbirth & Short-Term Disability Insurance – A Complicated Relationship

Childbirth
We get a lot of questions about pregnancy coverage in our Income Protection Insurance Policy. We’re specifically asked about coverage for regular childbirth most often. We hope this post provides some transparency into how we built and priced our Income Protection Insurance policy and individual policies in general.
 
We’ll write more about the in’s and out’s of our policy in future posts to help you learn about our products and Income Protection Insurance (aka Disability Insurance, aka Paycheck Insurance) in general
 
We built our Income Protection Insurance Policy to cover unexpected illness or injuries from the time you buy it Pregnancy is generally a planned decision made by two people with childbirth being a cause of the pregnancy. Not everyone’s situation is the same, but the ability to cover regular childbirth in an individual disability insurance policy is almost impossible because someone could buy a policy right when they are planning on trying to get pregnant.
 
Unexpected issues stemming from pregnancy like doctor-ordered bed rest could qualify you under the LifePreserve Income Protection Insurance policy, but it all depends on the situation.
 
No matter who you buy your policy through, a disability claims expert should be there to help guide you through the process. We’ll get into the claims process a little more in depth in a later post.
 
Some short-term disability group plans may provide benefits for regular childbirth, but there are usually terms and conditions around it so make sure to consult your policy, and insurance professional provided by your employer for full details and limitations.
 
If you have any questions feel free to leave a comment below or message us at helpdesk@lifepreserve.com