What You Know About Disability Is Probably Wrong

As with many unpleasant things, people don’t like to think about becoming disabled. But the consequences of ignoring your risks could be serious. Take the following quiz to see how much you know about disability.

1. A typical nonsmoking healthy female, age 35, has what percentage chance of becoming disabled for three months or more before she turns 65?

a. 3 percent
b. 17 percent
c. 24 percent
d. 38 percent

C. 24 percent. A healthy nonsmoking male of the same age has a slightly lower risk of a disability of three months or more, at 21 percent, reports the Council for Disability Awareness.

2. Most disabilities result from accidents, and workers’ compensation will cover me. True or false?

False. Most disabilities stem from illness. Disease, including cancer and heart disease, led the causes of disability claims in the Council for Disability Awareness’ 2013 Long-Term Disability Claims Review. Workers’ compensation will pay benefits only if you can prove your illness or injury occurred at work.

3. I’m young and healthy, so I won’t become disabled. True or false?

False. According to the U.S. Census Bureau, among people age 25 to 44, 11 percent have a disability, 7.3 percent have a severe disability, and 2 percent need assistance. Disability can occur at any age, to anyone.

4. All employers provide disability benefits. True or false?

Maybe. California, Hawaii, New Jersey, New York and Rhode Island require employers to provide short-term disability benefits to employees. Programs vary, but most short-term disability insurance programs (even privately insured ones) pay benefits for a maximum of six to 24 months. Otherwise, providing disability benefits is completely voluntary on your employer’s part. If you haven’t received plan information from your employer, you do not have coverage. If you have employer-provided long-term disability (LTD) coverage, consider yourself lucky. Only one-third of civilian workers had access to long-term disability insurance through their employer, according to the National Compensation Survey.

5. Most disabilities last only a short time, so if I do become disabled, short-term disability (STD) insurance will be enough. True or false?

Maybe. The Council for Disability Awareness found that among people who become disabled before age 65, 38 percent will have a disability that lasts five years or more. Short-term disability benefits last a maximum of two years. You can buy long-term disability coverage that will pay income replacement benefits for whatever period you select, from five years or until you reach age 65.

6. If I become disabled, I’ll be able to collect SSDI (Social Security disability insurance). True or false?

Maybe. Almost 9 million workers collect SSDI benefits. But qualifying for them is difficult. You must be totally and permanently disabled to qualify. Unlike SSDI, private disability policies pay benefits for temporary disabilities. Many plans also pay benefits for partial disabilities. If you can work, but your disability forces you to reduce your hours and lose pay, partial disability benefits can make up for some of your lost wages. You can also receive higher benefits with a private disability policy. In 2013, three-quarters of SSDI recipients received monthly benefits of less than $1,500 per month.

7. I have at least six months’ worth of living expenses put aside for emergency. True or false?

If you answered “true,” congratulations! You are better prepared for disability (or other emergency) than 68 percent of Americans, who have no emergency savings. If you answered “false,” maybe you should consider buying disability income insurance.

Disability income insurance will pay a portion (typically 60 or 65 percent) of your pre-disability earnings if you become disabled and cannot work. Disability policies pay only a portion of your pre-disability income to give you incentive to return to work. However, if you buy your policy with after-tax dollars, you won’t have to pay income taxes on any benefits you receive.

8. My employer doesn’t offer disability insurance, and I can’t afford an individual policy. True or false?

False. Unless your family can do without your income, or you have adequate savings, you can’t afford not to have disability insurance! Over a lifetime, the typical American earns $1 million or more. Calculate your lifetime earnings at www.whatsmyeiq.org.

9. All disability income policies are basically the same. True or false?

False. In addition to short-term and long-term disability policies, you can select between renewable policies and non-cancellable and guaranteed renewable policies. (There is a difference—we can explain why the latter policy is a better value.) Insurers also offer different policy riders, or additional coverages, that can increase the value of your coverage.

10. My family is young and we have a lot of expenses. To save money, I’m going to wait to buy coverage until I’m older and have a higher chance of disability. Good idea? True or false?

False. When you buy a noncancellable and guaranteed renewable policy while you’re relatively young and healthy, your premiums won’t increase, no matter what your health. (Some policies guarantee premiums until age 65). If you wait until you’re older, your premiums will likely be higher…if you can buy coverage at all.

You can reduce your premiums by increasing the “elimination period,” or the waiting period during which you must be disabled before your policy begins paying benefits. This approach makes sense for buyers with some savings. You can also reduce the policy’s benefit period. This equals the maximum amount of time your policy will pay benefits. Some policies will pay benefits to age 65, but if you have older or no dependents or another source of income, you might not need lifetime coverage.

We can work with you to find a disability income policy that meets your needs. For more information, please contact us.