For most people, the benefits section of a job offer can be a footnote. Health insurance coverage is essential, and having a good retirement plan is a plus, but the rest of the line items tend to be glossed over.
But one benefit is gaining higher visibility for employees during this post-pandemic environment, whenever professionals start a new job or review benefits annually: disability insurance. While typically less understood, disability insurance is a hugely important coverage that comes into play when an employee becomes too ill to work and must take a leave of absence.
Understanding how this coverage works, how to apply and the additional resources available in an injury or illness is essential, so here are the key parts of utilizing disability insurance.
TYPES OF DISABILITY INSURANCE
There are two major sources of disability insurance: Social Security Disability Insurance (SSDI) and long-term disability insurance (LTD). The first type is accessible to more than 156 million insured (https://www.ssa.gov/oact/STATS/table4c2DI.html) U.S. workers (96% of workers [https://www.bls.gov/news.release/empsit.a.htm]), and the second type is provided to about one in three workers (30-35% of workers) through their employers. It’s possible to apply and qualify for multiple payments, but it’s important to start by understanding what differentiates the two.
Workers and employers contribute toward Social Security Disability Insurance through their FICA payroll taxes, and the program itself is administered by the U.S. Social Security Administration (SSA). To qualify for SSDI, you must have worked for five of the past ten years, be below full retirement age (65-67) and have suffered from a severe work-disrupting injury or physical/mental illness that will last at least a year.
Long-term disability insurance, on the other hand, is a private policy, sometimes funded by both the employee and employer. Whether you purchase an individual LTD plan privately or are provided with the policy through a group plan for your employer, the insurance carrier requires recurring premium payments, typically on a month-to-month basis. This type of income protection is designed to cover serious injuries and illnesses that keep you out of work, including permanent disabilities that leave you unable to return to work.
WHAT IT COVERS
If approved for SSDI benefits, the amount you will receive depends on your earnings, similar to Social Security retirement benefits. The estimated benefit can be found on your Social Security statement, and the calculation is based on the amount you paid in FICA taxes during your career and the number of years you have been in the workforce. After receiving SSDI, your eligibility is subject to review by Social Security at certain intervals through Continuing Disability Reviews (CDRs), usually after one, three, five or seven years.
In addition to monthly checks, SSDI comes with other benefits, including Medicare coverage, which begins 24 months after your cash SSDI benefits start, annual cost-of-living adjustments (COLA), dependent benefits, protection for your Social Security retirement benefits due to disability freeze and free support with returning to work if you’re medically able.
Each long-term disability insurance policy differs in regard to how much you will receive monthly, how long you have to wait to apply, how long the benefits will last, how disability is defined and the premium amount. The size of your disability insurance benefit amount will depend on the policy, but long-term disability policies typically replace 60-80% of your income.
It’s extremely important to understand how a long-term disability policy defines disability to know if you’ll be able to collect on a claim. The definition of disability often refers to two important categories of consideration: any occupation, which means you are eligible for benefits if you cannot work any job, and own occupation, which protects your ability to work in your chosen profession.
By law, you are allowed to collect long-term disability benefits in addition to government assistance, and you may be required to apply for government benefits based on the provisions of your long-term disability policy. If your LTD policy is designed to coordinate with SSDI, then each month, the amount of SSDI benefits you collect will be deducted from what your private insurer pays out as an offset.
LTD plans can also include offsets for other benefits, such as veterans’ disability, workers’ compensation payments and other related benefits. If you have LTD coverage and don’t coordinate these offsets, you run the risk of losing your benefits.
HOW TO APPLY
The SSDI application process can be extremely lengthy and complicated, so it’s best to apply as soon as you stop working. People with one of 225-plus of the most severe conditions, including some cancers and heart disease, can be fast-tracked under the government’s compassionate allowances program (https://www.kiplinger.com/article/retirement/t051-c000-s004-disability-benefits-on-a-fast-track.html). However, a majority of initial SSDI applications are denied. When this occurs, you can pursue appeals and eventually receive a hearing and a decision from a Social Security administrative law judge, which could require up to two years.
If and when you are approved, it could still be months or years before you begin receiving SSDI benefits. Long-term disability approval is generally quicker, and benefits start paying as soon as your elimination period ends, which is likely to happen before your application for SSDI benefits has been processed.
The quality of medical evidence about your condition is a significant determinant of whether you will be approved or denied for disability benefits, and telehealth visits may not be able to provide the same quality of evidence as in-person medical care.
When submitting a claim for disability benefits, be sure to provide as much information to your doctor as you can. If you feel comfortable scheduling an in-person appointment, that is the best option, but even if telehealth is the route you’re most comfortable with, make the most out of the appointment by going over your symptoms and any other relevant information with your doctor in detail.
Aside from the uncertainty surrounding COVID-19 long-haulers and how to process their claims, the pandemic has made it more difficult for the insurance industry to operate at peak efficiency and productivity. Most Social Security Administration (SSA) offices remain closed, and there have been processing delays for SSDI as a result.
In addition, claims are often denied because the application has mistakes or is incomplete, even if the condition would otherwise be approved.
There is no doubt that applying for and managing disability insurance benefits can be confusing, but understanding the basics of SSDI and LTD will help you plan confidently for the future. Both programs are available to help employees dealing with an illness or disability to receive the financial support they need, and having a plan in place for the worst-case scenario is a great way to protect your income and your family.