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Figuring Out How Much Disability Insurance Coverage You Need


Disability insurance is not something most people consider. Unless a person knows someone in his/her early years that is disabled, taking good health for granted is very easy to do when one is young. Assuming such a tragic circumstance can only strike someone else is a well-known psychological method of self-protection against the possibility of something bad happening, but a disabling condition can strike anyone at any moment. In fact, one in four 20-year-olds will become disabled before retirement age, and with those odds, making sure one has enough disability insurance coverage to replace all or most of a person’s salary is crucial to avoiding financial disaster.

Disability insurance generally comes from three sources: employer-provided group policies, private individual disability policies and the benefits offered by the Social Security Administration. This coverage is intended to cover necessities, but not to replace the need for a person to work. Thus, while everyone should recognize the need to plan for this possibility and protect themselves accordingly, it is equally important to assess how these disability insurance options interact with one another in order to maximize benefit payouts and to determine how much additional income is necessary for financial stability.

Policy Review

The most important thing anyone with disability insurance coverage can do is review the terms of the policy. Clauses related to the percentage of income the insurance company will pay are a crucial provision that impact the level of benefits offered. For example, employer-provided disability insurance will typically pay up to only 60 percent of an employee’s salary, which leaves a significant amount that must be found elsewhere. A private disability policy could supplement this gap. In addition, how the policy defines “income” is also key information to know. Depending on an individual’s pay structure, the exclusion of bonuses or commission could greatly impact how much money an individual receives if he/she becomes disabled and consequently, whether the policy truly provides sufficient coverage. Further, many policies, both employer-provided and individual, place caps on the maximum amount the insurance company will pay each month, which could fall short of the percentage of income the policy is designed to replace. One final consideration for group or individual policies is how long the benefits are paid. Is it measured in months, to age 65, or beyond? Knowing this information is key to long-term financial planning.

Social Security Disability Insurance

The other alternative, Social Security Disability Insurance (SSDI), may seem like the easiest way to replace lost income in the event of a disability because it does not require an individual to pay a separate premium to obtain coverage, but merely to work a certain number of years. However, qualifying for SSDI is extremely difficult and time consuming, and almost always pays much less than any policy offered through an employer or purchased privately. Also, assuming a person does qualify, another important consideration in the overall picture of person’s disability coverage is the fact that receiving SSDI benefits can reduce the amount a person receives from group or individual policies. This adjustment offsets the total amount of money received, and could leave someone receiving less money than expected.

Contact a Disability Insurance Attorney

If you suffer from a disability that affects how much you can work, talk to a disability insurance attorney about your options for receiving benefits through SSDI or a disability insurance policy. Securing regular income during this difficult time is a top priority that deserves the careful and knowledgeable services of a disability insurance attorney. Farrell Disability Law helps clients throughout Florida and South Georgia get the money they need, and can assist you with your disability claims. Contact us for a free consultation.


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