If you have private disability insurance and you subsequently apply for and start receiving SSI, your insurance company cannot cancel your policy. In fact, your private insurance cannot drop you at all unless your policy has expired and you are up for renewal or you have missed a premium payment.
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There may even be some instances where your insurance agent suggests that you apply for SSI so that you can increase your total benefits. In order to qualify for SSI you have to have a disability for a year or provide medical proof that you will be disabled for a year or more.
In addition, you will have to have an established work history to qualify for SSI. If you end up qualifying, you will continue to receive full benefits from your private insurance as well as through Social Security.
What is disability insurance?
Private disability insurance is insurance that is meant to replace loss of income should you become too ill or injured to work. There are two different types of disability insurance, short-term disability and long-term disability.
Short-term disability is meant to cover loss of wages for a specified period of time. In most cases, if you are going to be disabled for less than 6 months, then you will be using short-term disability. In most cases, short-term disability starts at around 90% of your salary; however, the longer you collect on short-term disability the less it pays.
Some examples of those who may be covered under short-term disability include:
- Pregnant women
- Women who have recently given birth
- Construction workers who are injured and unable to perform their duties
- Someone who has had surgery that will keep them off their feet
Long-term disability covers you if you are going to be unable to work for six months or longer. How much of your salary this covers depends on the policy you choose. There are some policies, although rare, that pay as much as 80% of your salary. The average, however, is 60%. This is meant to represent what your salary after taxes.
It is important to note that, in most cases, your disability benefits are tax-free. If, however, your employer pays for your disability insurance or you deduct your premium payments on your tax return each year, then you will be required to pay taxes on your disability benefits.
Another thing that you need to know is that there are some cases where short and long term disability are sold together and others where they are sold separately. You need to know what you are buying when you make your purchase so that you are aware of exactly what your coverage will be.
In the case of both types of disability insurance there is usually a waiting period before you can start collection. This can vary from 30 days to 120 days; make sure you know the terms of your agreement so you can be prepared for the worst possible scenario.
If you purchase disability insurance, there is a chance that you may have to submit to a physical. The insurance company wants to determine whether or not you are a high risk for a long-term illness. Generally, if a physical isn’t required then you will pay more for the disability insurance than you would for a policy that requires a physical.
In addition, much like any type of insurance, disability insurance does not cover a pre-existing condition. If you were recently diagnosed with early onset Alzheimer’s, for example, and were thinking that you should purchase some insurance fast, it won’t work. The insurance company will not sell you a policy.
How long will disability insurance last?
As mentioned before, short-term insurance usually doesn’t exceed 6 months and may only be available for as long as 3 months, depending on your policy. As you can probably guess, short-term insurance isn’t designed for extended benefits.
Long-term insurance, on the other hand, can have a variety of different terms available, and it will depend on what type of policy you purchase as to what those terms are. You may see a limit on how many years coverage can last, which can be as short as 5 years or indefinitely. There can be a maximum benefit amount or an age limit on the insurance. Most policies won’t pay disability for an individual over the age of 65.
In the case of both short and long-term disability, there may be a monthly maximum payout established. In this case, you may not receive 60% of your income if it exceeds the established maximum.
SSI will last indefinitely; however, you will have to prove that you are still disabled each year. This will include providing medical records as well as meeting with a Social Security representative so that they can assess your situation. If the assessor determines that you can do some type of work, you will be removed from SSI and you will have to find a job.
Who needs disability insurance?
Anyone who earns money should purchase disability insurance. It becomes even more important if the loss of your income would drastically change your life. If you are supporting a family or even if you are alone and paying all of the bills, you need disability insurance.
If you are currently receiving disability insurance through your employer, you may want to consider buying an additional policy as well. This is because, in the majority of cases, group disability insurance does not have the same quality or amount of benefits as a private policy.
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When you purchase a private policy, you want to choose a policy that is non-cancelable and that has a guaranteed renewal. When a policy is non-cancelable, the insurance company cannot ever raise your rates. The guaranteed renewal means that the insurance company cannot cancel your policy. If you stop making payments, however, you are terminating the policy on your own.
Many people think that if they have health insurance that they don’t need to purchase any other types of insurance. Yes, health insurance is important and you need to have it, but it doesn’t cover your lost wages if you get sick or injured; only disability insurance offers that coverage.
One of the most important things that you can do for yourself is purchase disability insurance. We have mentioned a couple of times throughout the article the importance of knowing exactly what you are buying. Because disability insurance is so important, you need to take the time to read your entire policy thoroughly to ensure that everything you need is in the policy.
You have plenty of options; if what you want isn’t in your policy ask for it. If the insurance company says no, check with other insurance companies. Unless you are asking for something unreasonable, you will likely find an insurance company that will accommodate you.
Lastly, before you make your purchase, you need to start right here with our free quote tool. This tool will allow you to compare the premiums between several companies for the disability insurance that you need.
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