THE FACT IS – DISABILITIES HAPPEN. ARE YOU PROTECTED?
According to the US Social Security Administration, 1 out of 4 of those 20-years-old will become disabled before reaching the age of 67. You may be one of these in the statistics. So you ask – How Does Short Term Disability Work?
You may have the protection of worker’s compensation coverage in the event of an on the job injury or illness, but what about off the job injuries or illnesses. If you don’t have disability income coverage, you will have a loss of income. 78% of US workers live paycheck to paycheck to make ends meet. Would your savings be enough to cover everyday living expenses for an extended period of time?
Open enrollment is upon you and now you have to decide what insurance coverage is best for you and your family. You review the health insurance and finally decide on the plan that seems to work best for you. You add the group life insurance. You add the dental insurance. Do I need short term disability insurance? How does short term disability work? I have to make these choices.
- How much short term disability insurance should I get?
- What is the elimination period?
- What is the benefit period?
- What features should I have with my short term disability insurance?
Let’s take a minute and look at the question “How does Short Term Disability Work?”
What Is Short Term Disability Insurance
In a nutshell, short term disability insurance is insurance that pays a percentage of your salary if you become temporarily disabled. This means that if you are not able to work for a short period of time due to sickness or injury, the insurance will replace part of your income. Note that on-the-job injuries are usually excluded as they are covered by workers compensation insurance.
Typically a short term disability insurance policy will provide you with up to 70 percent of your pre-disability base salary. (This is the benefit amount.) Many of the short term disability insurance policies have a maximum benefit amount per month, subject to the company.
You can start receiving your benefit from your short-term disability insurance policy after the elimination period that is defined. Call it a waiting period. The elimination period is the actual time for coverage to kick in. This time can range from 0 days to years.
These benefits can last from just a few months to several years. Short term disability insurance policies will state how long you can draw the benefit.
Please note, there are two things to consider.
(1)“Non-job-related” is an important phrase to note. Injuries that happen while you’re on the clock will typically be covered by workers’ compensation, rather than short-term disability.
(2) Is your policy for accident and illness or accident only.
Do I Need Short Term Disability Insurance
That a question only you can answer. Let me share two examples of people who used it.
How Careful Planning Saved a Family and A Business – The Story Of Tim Merideth
While it may have been an adventure, neither Tim nor his insurance professional Joe Grabar, CLU, CFP, took the change lightly. Since Tim no longer had benefits through the church, they put in place health insurance, increased his personal disability insurance coverage, and added long-term care insurance. Importantly, Tim also got a disability insurance overhead policy for the business.
Just six months later, on a Sunday afternoon, Tim found himself doubled over in pain. What he thought was a kidney stone was, in fact, an iliac aneurism, which caused him to suffer two strokes. Doctors operated, but said he only had a 5 percent chance of survival. Tim beat those odds, reviving from a coma after three weeks and eventually moving on to rehab.
While Tim has been away from his fledgling business, it continues on in his absence because of the planning he and Joe had done. The disability insurance overhead policy helps the business meet payroll and pay vendors, while assuring customers that the business will go on.
Tim’s personal disability policy replaces a portion of his salary, which helps pay for the family’s everyday expenses, such as the mortgage and groceries. The long-term care policy is there to pick up where health insurance leaves off, when it comes to rehab and other care expenses.
Tim is doing better each day, and plans on going back to work at his company in the near future. “I’m so thankful I had these policies in place,” says Tim. “Without this planning, I’m not sure where my family would be financially, or if my business would even still be alive today.”
Life can change in an instant, and that life-changing moment may be as simple as sending a text message. That’s what happened to Travis Guthman.
Travis and his wife, Wendy, moved back to where he had grown up when they had the opportunity to buy his grandparents’ farmhouse. They felt it was an ideal place to raise their six kids. They also decided to put their prior experience to work and open up a pizzeria.
It was on a busy day—typical of one so many parents have— that Travis juggled driving and arranging a meet-up for his son. While he had pulled over to read the text, he decided to answer it while driving back home. That’s when, distracted by his phone, he hit a concrete footing on a narrow bridge—a route he had taken hundreds of times before.
The accident landed him in the hospital with a shattered pelvis and other injuries so severe that it has taken him almost two years and countless surgeries just to be able to walk with the help of a leg brace. During this time, he hasn’t been able to work, and admits the family would have lost the pizzeria if it hadn’t been for the disability insurance that his insurance professional Tom Bader helped him put in place.
The monthly payment from his disability insurance has allowed the Guthmans to pay their ongoing bills and expenses and keep food on the table. “I didn’t have to pull money out of the restaurant to live on; instead I could continue paying the employees and keep things running,” he says. “Without disability insurance we would have been in a world of hurt. You think it will never happen to you, until it does. Disability insurance has been a huge blessing for our family.”
Understanding how Short Term Disability works helps you determine if you need Short Term Disability insurance. Let’s look at three questions to help you decide if this is right for you.
How much income do you need each month to cover monthly expenses?
You are replacing net income – your takehome income. The minimum number to consider here is to consider those things that must be paid like the rent or mortgage, utilities, and groceries. If you add up these basic monthly expenses, then you will have a basic idea of how much monthly benefit you may need each month should you become sick, hurt, or totally disabled.
How Long Should Short Term Disability Insurance Last?
No one knows how long a sickness or an injury is going to keep someone disabled. Recently a friend of mine found out he had a bone bruise at his knee cap – He is out on disability for anywhere from 2 months to 2 years. maybe longer
Subject to what the plan offers we recommend a 1 to 2-year plan.
How Long Can You Go Without A Paycheck?
How long would your savings last if you lost one income? Sixty days? 3 months? Use this term to determine when your policy will start. With some plans, you can have them pay you from day 1 of the disability thereby replacing your savings if you have to go that long on Short Term Disability.
Georgia Short Term Disability
The State of Georgia does not have a state-run short-term disability program. Instead, you must purchase private insurance or get insurance through your employer to have this type of coverage.
How Much Disability Insurance Do I Need
Only you can answer that question. However, we have found that the most popular Disability Insurance is for $1500 to $2000 a month for a period of 24 months and a 30 day elimination period.
Before you complete a new policy application, ask for a Disability Insurance Quote. Keep in mind that you may have to show evidence of good health. Also, remember that a new policy will exclude coverage for any pre-existing conditions for one year.
There are three questions to answer when weighing your costs versus features.
- How long do benefits last? The claims payment period determines the length of time. Applicants choose between 3, 6, 12, and 24 month periods. Longer periods cost more.
- How quickly do claim payments begin? The elimination period defines the wait. Applicants choose between 7, 14, 30, 60, and 90-day waiting times. Shorter periods cost more.
- How much do you get? Policies can replace up to 70% of gross monthly income, subject to a cap of that as listed by the carrier. Applicants choose the coverage amount. Large amounts cost more.