We all hope to live a long life without any major health scares. But life is unpredictable, and at some point you are bound to end up with a major injury or illness that could affect your ability to work. According to the U.S Bureau of Labor Statistics’ 2019 Employee Benefits Survey, most group long-term disability insurance plans only cover 60% of income. And unfortunately, most companies only pay the cost of insurance premiums, which means workers still owe taxes on their own payments.
What types of insurance do companies offer?
Your company may offer two types of disability insurance — long term and short term disability. Short term payments can start being received after two weeks, and up to two years. However, you may be at risk with this if you become permanently disabled. With long term disability, you might have to wait several weeks or months to receive benefits. But you’ll receive payments anywhere from a few months to the rest of your life.
Why might an employer’s insurance policy not be enough?
Many private businesses offer long-term disability plans to their employees as a part of a benefits package, which might include healthcare and retirement accounts. Employees will typically pay a portion of the cost. A few things to keep in mind are:
- An insurance policy from your employer isn’t built to cover 100% of lost income. They typically only replace about 60% of your income.
- If your coverage is paid for with pre-tax dollars, any benefits you receive should be taxed, which unfortunately further reduces your funds.
- Employer insurance policies have what’s called an ‘elimination period,’ which ranges from 30 days to two years. This is the amount of time you have to wait from an injury to when you can start collecting benefits. With employer plans, you don’t have much wiggle room when it comes to negotiating a lower elimination period. This means you could end up having to wait longer to start receiving the disability payout.
So what do I do if my employer’s insurance policy isn’t enough?
If you feel like your employer’s insurance policy isn’t cutting it, you may want to consider getting an individual long-term disability insurance policy. It’s a great supplement to employer coverage, or stand alone if you don’t have an employer’s plan at all. Unlike employer’s insurance policies who typically cover 60% of your income, individual policies cover 70-85%. If your injury or disability will last a few years or more, or you’re planning to rely on disability insurance until you retire, an individual long-term disability policy is the smart move. Since benefits on these plans aren’t taxed like employer plans, and individual policies won’t disappear when your employment ends. Individual plans are also more flexible and customizable, with the ability to negotiate elimination periods, and offer additional opt in policies.
Need help receiving disability insurance benefits? Disability Associates has you covered! We offer legal representation to disabled individuals who are seeking Social Security Disability and Supplemental Security income benefits. Contact us today!