You have an accident that forces you to quit working for a long time (one year or longer). You have a sudden health event, such as a heart attack or stroke, that takes you off work. You lose all your income. How do you survive financially?
Here is a checklist that you can use now to plan to survive a disability later:
1. Find out what type of group disability insurance policy your employer has purchased, if any. These are common, especially among larger and mid-sized companies.
- How long must you be off work before the policy begins to pay? This is often called a waiting period or elimination period.
- How much is the maximum monthly benefit? (60% of your salary is common, but plans can vary).
- What other sick leave benefit is offered by your employer?
2. How much will your Social Security disability benefit be? This is determined by how long you have worked, your total wages, and your age. You can get an estimate by calling Social Security or going to www.socialsecurity.gov and setting up an individual account. Caution: Social Security has the following limitations for disability:
- It only covers a disability lasting 12 consecutive months or more (No short term benefit is available).
- It pays no benefit during the first 5 months of a disability (There is a 5-month waiting period).
- You must meet the strict definition of a medical disability. Being off work is not enough, even with a doctor's excuse. Social Security has their own guidelines. For persons under age 50, disability usually means that you cannot perform ANY full-time job, not just the job you are used to doing). The medical guidelines are very difficult to meet.
- Aside from all these limitations, it will take an average of 4 months to get a disability application processed (approved or denied). An appeal will take up to 18 months longer. Social Security is not quick. So, plan for another means of financial survival while you wait.
3. Start a savings plan or add to a plan you already have. This is probably the weakest link for most individuals. Little or no savings. If you suddenly become disabled, and you depend on your income to pay the bills, savings will be absolutely essential. There are usually no government benefits to help pay the rent, mortgage, utilities or other living expenses. Savings to provide a few months of household expenses will be very valuable if you become disabled. It can mean the difference between keeping your home or losing it, being able to afford medical care or doing without it, and a dozen other important necessities. Saving a few dollars a month over a long period of time can offer a safety net should a health catastrophe strike.
Disability strikes, as most catastrophes strike, unannounced and unplanned. It can happen very suddenly. When the medical emergency is over, attention turns to the financial catastrophy. How do I survive without my job and with no income?
What are the possible sources of income for a suddenly disabled person?
(1) Social Security. Social Security disability, a type of federal insurance for workers, may be available if the worker
- has earned coverge by working 5 out of the most recent 10 year period. If not, there's no benefit.
- can prove that he/she meets Social Security's strict definition of a medical disability. (Just being off work isn't enough, even with a doctor's excuse).
- will be disabled for at least 12 consecutive months.
- can survive 4 to 24 months while the matter is being decided. Social Security is not quick. Therefore, workers need something else to tide them over while Social Security slowly meanders its way to approving or denying the application, scheduling hearings, doing examinations, etc. (70% of all applications are denied, so it's not a sure thing by any means).
(2) Employer sponsored disability insurance or sick leave. Many employer's offer some form of accumulated sick leave. They may also offer a private insurance policy for short-term and/or long-term disability. You should check to see if your employer offers this insurance, if you are covered, what the "waiting period" is, and how much benefit you may get if you become disabled. These plans usually pay while you are waiting on a decision by Social Security.
(3) Savings. We recommend savings to pay essential living expenses (rent, mortgage, utilities, food, etc.) for at least 6 months.
There are relatively few programs available to help disabled workers financially. Rent, mortgage payments, utilities....they all go on....but Social Security can take months (even years) to approve benefits. We can't stress financial planning enough. While we don't sell or endorse insurance plans, we strongly encourage you to consider protecting yourself and family from disability by an insurance plan other than Social Security--whether through your employer or a private insurer.
