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Disability planning and programs: Part 2
[Continued from here, discussing links and references from this CDA Web page.]
Step 3 is where we get into the meat of disability finance:
- Employer sick pay
- State benefits
- Disability insurance benefits
- Workers comp
- SSDI/SSI
Employer sick pay, or sick leave, may be generous in one industry, lean in another. At a small company, nothing may be available other than wishes for good luck. Some large and even mid-size companies offer long-term disability policies. Where ever you work, you should learn the specifics of the policy because it may be your first line of defense, even if it runs out long before a health problem is resolved.
According to the Insurance Information Institute, "In some states, such as Hawaii, New Jersey, New York and Rhode Island, state law requires employers to provide disability benefits for up to 26 weeks." (Don't confuse this with workers compensation.)
Over at CostHelper.com, we see that "Disability insurance provides income to help pay your living expenses if you are unable to work for a significant length of time because of injury or illness. Generally benefit payments are 60 percent of your total salary."
The CDA page explains that "[d]isability insurance can be an invaluable lifeline for disabled workers and their families:
- If your employer offers disability insurance make sure you fully understand what benefits are available to you and how your company's disability insurance program works.
- If disability insurance is NOT provided by your employer, it can be purchased individually at affordable rates. Contact your insurance agent for more information.
- Self-employed individuals can also benefit greatly by having disability insurance. Consult your financial advisor or insurance agent for assistance."
The CostHelper.com page says to "[e]xpect to pay between 1 percent and 3 percent of your annual salary for a good disability plan, according to DisabilityQuotes.com. That works out to $600-$1,800 for someone earning $60,000 a year."
Earlier, we cautioned not to confuse state disability benefits (if available) with workers comp benefits. In the usual sense, workers comp addresses workers who are injured on the job. However, if work-related, an illness and subsequent disability may be covered by workers comp, too. As the CDA page says, "After a short waiting period, workers' compensation generally pays a portion of your former wages or salary. Benefits vary significantly by state and are restricted to a specific maximum and minimum amount." Here's a link to programs in each state.
As mentioned in our preceding post, SSDI is a form of federal "insurance" that workers qualify for by having paid enough funds into Social Security (from paychecks) by working long enough at jobs with employers who make the payments (including self-employed). Here's the link to the main disability information page of the SSA, including topics such as basic program information, who is eligible, how to apply and so forth.
In your planning, count on at least a six-month wait before receiving SSDI payments.
SSI is not funded by paycheck contributions but by general tax revenue; it provides cash to meet basic needs for food, clothing, and shelter. The program is designed to help aged, blind, and disabled people, who have little or no income and few resources.
Here is a link to the SSA's page outlining eligibility requirements for SSI.
Here's the bracing news: If you don't have access to any of the preceding resources, you're pretty much left to your own devices and social-family network. For the "average" long-term disability, you'll need to cobble together some method to make it for 2 1/2 years.
The first fallback position is personal savings. Then you're looking at such drastic measures as using credit cards, dipping into a mortgage or retirement funds. Here's how the CDA page lays it out:
- "Personal savings
A small percentage of Americans are lucky enough to have savings, investments or other financial resources that can supplement or replace their income during a prolonged disability. The rest of us, unfortunately, are not so lucky. Any disability, especially one lasting more than 90 days, would quickly drain our savings. After all, Americans' savings rate is at an all-time low. A full 1/3 of Americans have no retirement savings and no pension, according to the Social Security Administration. Talk about stress!
- "Last Resort" income sources
If all else fails, you can begin paying expenses with credit cards, get a second mortgage, take out a home equity line of credit, withdraw money from your retirement plan, and ask family and friends for assistance."
As you can see, maintaining one's health is the best option. Of course, no one can do that indefinitely, so financial planning is the next priority. If you're still healthy, look for ways to promote an even healthier lifestyle. Then, begin your financial planning process.
If you or a loved one needs disability help now, you can use the links provided to contact SSA officials or advocates and disability attorneys.
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Applying for disability benefits from the Social Security Administration can be a daunting and frustrating challenge. For more on the basics of disability, SSI, and SSDI, please click here.You will also have the opportunity to click on information about attorneys who can help you and a link for a free case review.
