Disability Insurance - 4 Facts to Know

Most people do not believe that disability insurance is something they need. Becoming disabled is always one of those things that always seems to happen to someone else and no one ever thinks it will happen to them. However, according to research on the subject, almost 3 out of 10 working people will be faced with disability at some point. Since it is not a very common topic to discuss, many people do not know the first thing about disability insurance. Here are a few facts that you should know:

1. Your Employer's Requirements

Depending on which state you live in your employer is likely to be required to carry short-term disability benefits for you. This means that they have insurance that will cover you for 26 to 52 weeks if you become disabled on a short term basis. If you have a job, you are covered for the short term. However, any long term disabilities are not covered by this protection. These short-term benefits often come with a waiting period. This helps keep some people that do not have serious disabilities from filing frivolous claims. You sometimes have to wait a few weeks before benefits kick in. 

2. Social Security Benefits

Most people are familiar with the benefits that you receive from the Social Security Administration when they retire. However, many people do not realize that the Social Security Administration also provides benefits for the disabled as well. If you are not covered by an employer-provided policy for the short-term, you can apply at the Social Security Administration for benefits. The program is designed to cover a disabled person until they improve enough to work. If their situation never improves, they can be guaranteed a long-term payment from the Social Security Administration.

3. Supplemental Coverage

Depending on your current lifestyle, the first two options for disability coverage are not usually enough. If you depend on the Social Security Administration to pay for everything you need, you will probably be in for a surprise. Most of the time, the benefits received are not nearly enough to live a comfortable lifestyle. In this case, supplemental insurance coverage can help make the difference. It can supplement your income to the point of living a regular lifestyle without working.   

4. Pre-Tax Benefits

Deciding how much coverage to buy can be tricky. One advantage that you do have in this regard is with tax-free benefits. When you pay for your disability insurance with after-tax dollars, any benefits you receive will come in the form of tax-free dollars. This means, if you live comfortably now, you need to get enough disability coverage to provide for about 60 to 70 percent of your income. When you work, about 30 to 40 percent of your income is taken away in taxes. Therefore, if you are on disability you only need something that will pay for your pre-tax salary.