Have you just started a new job, and heard a lot of different terms in orientation about “disability?” Are you faced with the possibility of being on disability, and don’t understand everything? At the Herren Law Firm, we understand the process of disability insurance and filings, and can help when the time comes.
What is Disability Insurance?
There are two types of disabilities, and disability insurance. It’s important to know the difference between the two. Both long-term disability (LTD) and short-term disability (STD) are separate insurance policies that serve as a replacement for your regular income in the event you are disabled. Disability insurance pays you when you are unable to work due to an illness or injury, regardless of the cause. It also covers gaps when your sick/vacation time are used up, and may keep you from having to dip into savings and retirement funds to pay your bills.
Both types of insurance are separate from health insurance, which only covers medical expenses. Disability insurance is also not the same as Worker’s Compensation, which is issued through your employer and only for work-related or workplace injuries suffered on the job.
Short Term Disability
The term means just that—usually 30 to 120 days, and starts paying within a few weeks. Short term is for things like a broken leg, maternity leave, or other limited convalescence. If you’ll be going back to work in a few weeks or a few months, this policy pays you for the time that you’re unable to work. STD is only available through your employer. If your employer doesn’t offer it, you will have to use your sick time, vacation time and savings/line of credit to cover your expenses until you return to work. (California, Hawaii, New Jersey, New York and Rhode Island may require your employer to offer this coverage.)
Long-Term Disability
Long-term disability is used when you will be out of work for a longer period. LTD starts after you’ve exhausted sick/vacation time and your short-term disability policy ends, and takes longer to start paying. An emergency fund can bridge the gap between the end of the short-term policy and the beginning of the long-term policy, although, ideally, it should start where the STD ends.
“Long-term” doesn’t always mean a permanent disability. It just indicates a medical condition that prevents you from working. The average LTD claim is for 3 years, although some do go on longer. If you don’t have three or more years of savings to cover the loss of income, long-term disability covers some of your income so you can pay your regular bills.
If you’re considering applying for disability through Social Security (SSDI), know that getting it can take a year or more, is difficult to get and approval is not guaranteed. The Herren Law Firm has helped over 4,000 people file claims and suits they needed for disabilities.
What LTD Covers
An LTD policy pays about 60% of your regular income. If you buy your own long-term disability policy and pay your premiums with after-tax dollars, the income from the policy is tax-free. That means with a $100,000 yearly salary, you’ll be paid $60,000 year, tax free.
Employer Or Self Pay?
Most people have long-term disability insurance through their employer, but you can also purchase a policy individually. It is more expensive, but an LTD also pays more, and longer, depending on the policy you chose. When considering cost and affordability, it may be time to do a financial housecleaning and see what you can eliminate from your budget in order to cover an LTD policy. What’s more important—something that doesn’t create value, or something that can save you from bankruptcy if you’re unable to work for a long time?
The length of the payments depends on your LTD policy. Since the average disability is three years, you can purchase a policy that pays as long as five years—or until you retire. Some policies will cover you until age 67, when you can start receiving Social Security. Doctors, nurses and others that use their fine motor skills benefit from this kind of policy, since it guarantees income if they are disabled by an illness.
Need help?
Having trouble with an insurer? Call the Herren Law Office today at (713) 682-8194. We’ll give you a free consultation, and work on a contingency fee basis to help you get what you paid for. We’ve been helping people for over 30 years, and would be happy to help you too.
