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

Pre-Existing Conditions and Income Protection Insurance

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 into 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 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 keyword 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.