An often-overlooked income benefit for those with disabilities or serious illnesses is SSDI.
What is the age when we realize a disability or serious illness could happen to us? Thirty? Forty? When we’re young, many of us are prone to optimistic thinking. “If I ignore my symptoms, they will go away.” “I’m young and healthy. As long as I stay active, I’ll be fine.”
In reality, the facts say something else. One in four of today’s 20-year-olds will become disabled while they’re working age. This can create untold financial hardships for those individuals and their families if they are unable to work. As we recognize Disability Insurance Awareness Month this May, Allsup Employment Services (AES) reinforces the importance of disability insurance through employers, private policies and the Social Security Administration (Social Security Disability Insurance – SSDI). Most of us don’t give a second thought to protecting our tangible assets with insurance policies on our homes, vehicles and valuables. But too few of us protect our intangible asset – our income.
For those who take advantage of employer-offered plans for short- and long-term disability insurance, the income benefit typically is not sufficient to cover every expense when you are not earning wages. Group baseline plans tend to replace roughly 40% of your income, leaving an income gap. Some group plans may offer a benefit up to 60% of pre-disability income, but with the average long-term disability claim at 34.6 months, the pool of emergency savings can shrink quickly causing major financial hardships – even bankruptcy.
Protecting Yourself From Loss of Income
Disability insurance plans, if offered by employers, provide benefits for non-work-related illnesses or injuries. (Incidents in the workplace are addressed through Workers’ Compensation.) Short-term disability (STD) plans provide benefits for approximately 3 to 12 months on a per disability basis and may be offered to employees as a company-paid benefit. For those employees who are unable to work for an extended time, long-term disability (LTD) plans provide monthly benefits after a waiting period or other benefits have ended.
However, the U.S. Bureau of Labor Statistics reports STD was available to just 40% of civilian workers in March 2020. Long-term disability plans were available to 35% of civilian workers in that same period. Most civilian workers were not required to contribute toward the costs of these disability benefits. Fifteen percent of civilian workers had a contribution requirement when participating in STD plans, and 6% contributed to LTD plans.
The U.S. government data also reveal that access to STD and LTD plans varies according to wage group. For example, in the lowest wage group, 9% of workers had access to LTD, compared to 59% in the highest wage group.
Percent of civilian workers with access to disability insurance benefits by wage group
If employer-sponsored LTD plans are not available, people may protect their income should they become disabled by purchasing individual policies from reputable companies or through professional or trade associations. AES recommends working with licensed insurance agents to help you understand the options and calculate the costs based on several key factors such as your age, health status, benefit amount and benefit period. As a rule, private LTD policies cost approximately 1% - 3% of annual income.
Turn To SSDI For Extra Protection
An often-overlooked income benefit for those with disabilities or serious illnesses is SSDI. Many Americans are not aware of this vital benefit they have earned while working. Yet, employers and employees fund this federal program by paying Federal Insurance Contributions Act (FICA) payroll taxes. SSDI is available if you meet these qualifications:
● Have a medical condition, illness or injury that prevents you from working for 12 months or is terminal.
● Have worked at least five of the last 10 years and paid FICA taxes.
● Are between 21 and full retirement age.
● Are under the care of a healthcare professional who can confirm the severity of medical condition(s).
Though the SSDI approval process can usually take months or much longer, the benefits can make a huge difference for those dealing with significant illnesses or disabilities. These include:
● Monthly income: the average 2023 benefit is $1,483, and it maxes out at $3,627.
● Medicare coverage: medical and prescription drug coverage begin 24 months after SSDI benefits start.
● Dependent benefits for children under the age of 18.
● Annual cost-of-living adjustments.
● Return to work incentives through Social Security’s Ticket to Work Program.
As a Social Security-authorized Employment Network (EN), AES helps clients get the most out of Social Security’s Ticket to Work Program when they are medically cleared to return to work. This program allows them to work again without losing any important SSDI benefits during the Trial Work Period (TWP) which lasts 9 months. Our case managers have experience working with the SSA and individuals with disabilities or chronic illnesses. We know getting back to work can be stressful after a lengthy absence, and we are ready to support and guide them throughout the process.
