If you have been putting off buying disability insurance because you feel comfortable that the government benefits will take care of you, you may want to rethink that strategy.
The mad rush for social security disability benefits, by laid off workers and aging baby boomers, is creating a bloat of applicants and pushing the financially impaired system toward the brink of insolvency. New congressional estimates say the Social Security Trust Fund that supports Social Security Disability will run out of money in just 6 years, leaving the program unable to pay full benefits, unless Congress acts. About two decades later, Social Security's retirement fund is projected to run dry as well.
Multiply your annual earned income by the number of years you plan to work (or in these days perhaps have to work) for an idea of your financial loss exposure to long term disability.
Disability insurance is designed to protect one of your most valuable assets, your ability to earn an income. If you are employed it is possible that your company is providing some form of disability of insurance. In several states (such as California, New York , New Jersey, Hawaii , Puerto Rico and Rhode Island) there is a statutory temporary disability benefit. Your company may provide long term disability (LTD) coverage if you are employed but it is not mandatory.
Individually underwitten disability policies have the most comprehensive coverage if you can qualify both financially and medically and are a good defensive investment.
In the best of circumstances Social Security Disability ( SSD) is not an easy thing to get. Not only is there a requirement to have worked a certain number of quarters, but the definition of disability (see below) is particularly onerous and only really benefits you if you are totally disabled and unable to work at anything anywhere.
Read the Social Security Administration: Information about Social Security Disability and consider the criteria that the SSA uses to determine if you are eligible for benefits:
" 'Disability' under Social Security is based on your inability to work. It considers you disabled under Social Security rules if:
- You cannot do work that you did before;
- It decides that you cannot adjust to other work because of your medical condition(s); and
- Your disability has lasted or is expected to last for at least one year or to result in death.
This is a strict definition of disability. Social Security program rules assume that working families have access to other resources to provide support during periods of short-term disabilities, including workers compensation, insurance, savings and investments".
The level of uncertainty regarding the SSD program makes it something that you should not count on in your financial planning. As you can see the rules are designed under the assumption "that you have access to other resources to provide support".
Some disability insurers offer a social security substitute policy that will pay if social security does not pay.
Those who enjoy the thrill of riding by the seat of their pants without disability insurance coverage should consider employing a backstop, just in case. You can push the waiting period back to save money.
For more information call me 203-325-8640