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Facts you should know about Workers' Compensation and Social Security Disability Benefits.
Workers' compensation benefits vary by state. According
to the 1994 Analysis of Workers' Compensation
laws, benefits can be as low as $100
per week. You can find out what your
state pays by calling the U.S. Chamber
of Commerce. The important thing to
remember is that workers' compensation
pays for disabilities that occur on
the job which occur only 38 percent
of the time (Accident Facts, 1994
Edition).
Social Security disability benefits are difficult to
receive because their definition of
disability is very restrictive. In
1993, Social Security received 1.4
million applications for benefits
and 55 percent of the applications
were denied. (Social Security Bulletin--Annual
Statistical Supplement, 1994).
Even if you did qualify, the benefits you receive may
be far below what you would need to
maintain your current lifestyle.
* Employee Benefits in Medium
and Large Private Establishments,
1993
** Employee Benefits in Small
Private Establishments, 1990
Disability Income Insurance Glossary:
Below are some of the common terms, benefits and features
available in disability income policies.
Benefit or maximum period:
This is the length of time benefits
would be paid for a disability. The
longer the maximum period, the higher
the premium.
Benefit amount:
The benefit amount is based on the
income being earned at the time of
purchase. Most policies limit benefits
(from all sources) to no more than
70 to 80 percent of monthly income,
so there is an incentive to return
to work. Generally, people with lower
incomes will receive a higher percentage
of their pre-disability income than
higher paid workers receive.
Future purchase or guaranteed purchase option:
This option allows you to increase
coverage as your income increases.
It can be an important feature if
income is likely to rise.
Guaranteed renewable or non cancelable policies:
A guaranteed renewable policy
guarantees to provide coverage as
long as you continue to pay premiums.
The premium cost could increase with
this type of policy. A non cancelable
policy guarantees to provide coverage
if you pay the premium, and also guarantees
that the premium will not increase.
Indexed disability income benefits or cost-of-living
adjustments (COLA):
After a year of disability, indexing
or COLA adjustments may help to make
your benefit payments "inflation proof."
Indexing will adjust the monthly benefit
amount based on the Consumer Price
Index or by a specified percentage.
Partial or residual disability benefits:
Partial disability benefits usually
pay a set amount for a set period
of time. For example, your DI policy
states you will be paid half of the
monthly benefit for six months if
you should be injured or sick and
meet the definition of total disability.
Residual benefits usually allow for
payments that are proportional to
the loss of income if you're injured
or sick and are unable to work, but
have a loss of earnings. Some policies
require total disability for a period
of time before residual or partial
benefits would be paid.
Total disability :
Some policies define total disability
as the inability of the insured to
perform any work for which he/she
is qualified. Other policies will
define total disability as the inability
of the insured to perform the duties
of his or her own occupation. Some
policies may change occupation definitions
after a specified period of disability.
Waiting period or elimination period:
This is a period of time after disability
occurs for which you will not receive
benefits. Select a waiting period
based on the maximum length of time
you will be able to meet your expenses
with short-term savings. The shorter
the waiting period, the higher the
premium.
Waiver of premium :
Many companies offer a benefit that
allows you to discontinue premium
payments during disability.
These are some of the many features available in the
disability income insurance industry
today. You will want to work closely
with an insurance representative to
tailor a disability income insurance
plan that meets your needs.
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