Why Have Your Own Disability Insurance Policy?
Here are the basics on how disability insurance works in the state of Florida, and some reasons why a separate policy for you and your family really makes sense.
Florida SSDI Benefits
Florida does have Social Security Disability Insurance (SSDI) available as in other states, but it’s hard to get approved for and doesn’t provide as large an amount of replacement income as do some other states.
However, there are some real benefits here, though you have to go through a process. Most people aren’t approved the first time through, and you may need an expert to represent you during the process to speed it up a bit and increase your “odds” of a satisfactory final SSA decision.
Both SSDI and SSI (Supplemental Security Income) are possible sources of disability benefits if your work-history qualifies and your employer paid into the system. Low-income applicants may also qualify, and of course, you have to have a qualifying disability – which is “difficult” to say the least. Only those who cannot work for a year or more due to their injury or illness can qualify.
If you are approved for SSI benefits, Florida may add a supplemental payment equal to 10% of the SSI payment. And you are also going to qualify for Medicaid and/or food assistance at that point.
But only about a third of applicants for disability-related Social Security benefits are approved. And it may not be enough – so you really shouldn’t just count on SSDI as your sole plan.
Employer-based Disability Insurance
Count it a blessing if your employer provides you with a good disability insurance policy. Not all employers do. You may get discounts through a group-rate or just have a plan added “free” as an employee benefit.
However, there are often limitations to employer-based disability insurance plans. Most cover 60% of your pre-tax income, at most, as the benefit determination factor. Sometimes, only a short or long term plan may be offered – though some companies offer both. Group plans also tend to cap benefits, which can be a big down-side for high-income policyholders. And if you change jobs, you could suddenly be left without any coverage.
Note that workers’ compensation insurance is NOT the same as disability insurance. The former only protects you against work-related injuries, while the latter protects you against any and all disabling injuries.
A work-provided policy is certainly a big plus, but just like with SSDI benefits, it may not always be enough.
5 Good Reasons to Buy Your Own Disability Insurance
The first reason to invest in your own disability insurance policy is clear enough by now – other options, while they will help, often fall short of meeting your full financial obligations. And health insurance, life insurance, and workers’ comp won’t cover everything that disability insurance covers.
Secondly, the risk of a disability is rather high. Most people are more likely to buy life insurance than disability insurance, and yet, you are much more likely to be disabled than to die during the course of your working career. About a quarter of those age 20 today will suffer serious disabilities before reaching retirement.
Third, only by having your own policy can you 100% customize it to your exact needs and preferences. This allows you to increase the benefit to truly fit your income level, lock in lower rates if you sign up early enough, and to choose maximum benefit periods ranging from 2 years to “until retirement.”
Fourth, you can gauge the premiums and benefit level to protect your family and your major investments as needed – and change it later if your situation changes. That means figuring out how much your family could do well on for how long and how much (and for how long) you need to meet financial obligations like a home mortgage, whole life insurance premiums, business expenses if you are self-employed, college for your kids, or a major car payment.
Fifth and finally, disabilities can very quickly eat up your savings and put your family in financial hardship. Most families would suffer greatly within a month or two, at most, of the primary breadwinner suffering a severe disability.
How Exactly Does Disability Insurance Work?
Before buying a policy, it’s important to fully understand exactly what disability insurance is and how it works. Details will vary from insurer to insurer and from policy to policy, but here are the basic universals.
With disability insurance, you pay a monthly premium to your insurer just like with other insurance types. In return, your insurer will replace a specified percentage of your average monthly or weekly salary to help you cope with the financial loss that follows from a disabling injury or illness.
Be careful to note the percentage of income reimbursed, whether it is pre or post-tax income, and whether it includes bonuses, benefits, and other valuable perks that are a part of your total income.
The condition must qualify under the policy’s terms. It generally must be such that you cannot physically work or can’t reasonably be expected to do so for medical reasons. Most of the time, this is based on things like cancer, cardiac conditions, back pain, or arthritis. Only rarely is an accidental injury the reason, but should it occur, of course, you want to have it covered.
Also, pay attention to any caps put on the benefits and to the duration and frequency of payments provided. You want to make sure the policy covers long-term disabilities for a sufficient length of time, and it’s good if it covers short-term disabilities as well (ones that last for under a year.)
Shopping For the Best Disability Insurance
In some cases, you may have a good disability policy through your employer already or have such high savings and low financial obligations that disability insurance wouldn’t make sense. But for most working people, it makes a lot of sense. The question is simply, “How can I find the best policy?”
There are too many variables for the average person unfamiliar with the ins and outs of disability insurance to just choose a policy on their own. You do best to do a lot of research or to rely on a well-trained agent – or both.
One of the best brokers of disability insurance and other insurance types in the state of Florida is Flagler Financial. Feel free to give them a call and talk to an agent today to get started!