Long-Term Disability: What Does It Mean for Your Future?

Planning for the future is important. Most people already know that it’s a good idea to have a rainy-day fund or emergency fund—but what about long-term disability? If you develop a long-term disability during your working years, are you prepared?

Today, we’re discussing this very important topic. We’re covering why it’s important to plan for potential disability, what to include in your plan, and what your options are if you become disabled.

Get the answers you need, below.

Why You Need to Plan for Disability

Here’s a fact you should know: according to data from the Social Security Administration, a 20-year-old worker has a three in ten chance of developing a disability before reaching retirement age. Those aren’t insignificant odds!

Disability is much more common than you might realize. While some disabilities are congenital (present from birth) or life-long, many others come about suddenly—like from accidents or illnesses.

If you are young and healthy now, that’s great! Remember, however, that you may not be that way forever. It’s important to plan ahead to reduce stress and financial difficulties down the road. Planning ahead can help make sure you are able to support yourself when you can’t work without having to sell off possessions, pull from retirement accounts, or rely on family to cover expenses.

How to Plan for Long-Term Disability

In addition to a rainy day fund—which is a good idea for everyone to have—you might want to consider short-term and long-term disability insurance. Disability insurance is a type of insurance that covers you in the event you experience a disabling injury or illness. Essentially, it’s not for when you need to miss a week of work for the flu. You qualify when you’re unable to perform your normal work duties.

Short-Term Disability Insurance

Short-term disability insurance covers a percentage of your paycheck (generally between 40 and 70%, depending on your plan). Benefits begin after an elimination period (a waiting period) of 7-30 days, depending on your plan. The average length of time you can receive benefits is 3, 6, or 12 months. If your disability is expected to last longer than your short-term benefits period, that’s when you would need long-term disability insurance.

Long-Term Disability Insurance

Long-term disability insurance covers a percentage of your paycheck (generally between 60-80%, depending on your plan). Your benefits begin after a longer elimination period, generally 90 days or more. The length of time you can receive benefits depends on your policy. It might be anywhere from 2 years to life.

When choosing disability insurance, it’s important to look at:

• Your premiums. The older you are, the more expensive the premiums. That’s because older people are more likely to use the policy. The sooner you buy disability insurance, the cheaper it will be.
• The elimination period. How long will you have to wait until you get your benefits? Knowing this helps you plan your emergency fund.
• The length of benefits. How long will you get benefits? This is especially important to know for long-term disability, when you might need benefits for years.
• Exclusions for pre-existing conditions. Some policies won’t cover conditions if they are “pre-existing.” (This means you had them before you started the policy). Check if the policy you’re considering has exclusions.

Finally, a good long-term disability plan should include a financial plan. This includes establishing a budget and prioritizing expenses (especially health care expenses). If necessary, the plan should also include where to cut costs and find assistance. (For example, assistance can mean mortgage modification, local property tax exemptions, rent assistance, utility assistance, WIC, etc.)

When You Have a Long-Term Disability

When you’ve suffered a disabling injury or illness, it’s important to know your options for support.

If you have short and long-term disability insurance, you can make a claim under those policies. In addition, if your disability is expected to last a year or longer, you can make a claim under Social Security Disability Insurance.

Social Security Disability Insurance (SSDI) is a safety net for those who cannot work for a year or more. Provided you qualify, SSDI offers monthly income assistance benefits. (We’ve written about the medical requirements and work requirements for SSDI.)

It’s even possible to receive SSDI and long-term disability insurance benefits at the same time! Your long-term disability insurer pays you the difference between your insurance policy amount and your SSDI benefits.

SSDI is a lifeline for many, especially those who either don’t have disability insurance through their employer or have run out of benefits from their long-term disability insurance policy.

Call Us Today

If you are considering an SSDI claim, we’re here for you. The Social Security attorneys at Casper & Casper have years of experience helping people just like you file successful claims for SSDI benefits.

Call us today to learn how we can help you.