Disability is something most people don’t think about. They think about: “What happens if I die? I need life insurance.” But more people, more often than not, are going to end up disabled. One in four will have a chance of becoming disabled, and the average duration of that disability is three years. That’s a lot of time to lose income.
Here’s an interesting stat: About 40% of mortgage defaults are due to a disability. So, the question becomes: How to replace lost income? We know Social Security does have a disability program. It’s through SSDI or SSI. You can apply online at www.socialsecurity.gov or call their 800 number (1-800-772-1213).
We do know if you have a terminal illness, you automatically qualify for disability through Social Security. But if it’s not terminal, it has to be a disability that lasts longer than one year, and you have to go through an application process. It requires medical records. That processing can take anywhere from three to five months. We’re hearing of long delays on getting qualified for that. And your payment is based on your earnings record. If you do have dependents, they may qualify for payments. This disability is going to be reassessed every five years. The good news on this is if you are on Social Security Disability after two years, you automatically qualify for Medicare, so your health insurance is covered then.
Now know that this is only for people who are currently working. I often get the question: Can you apply for disability if you are retired? The answer is no.
Then the bigger issue is maybe that’s not enough or maybe you don’t qualify. That’s where disability insurance can come in. Many of us can get that through our employers. They often offer this type of insurance. It will replace 50-60% of your income, but there may be an offset if you apply for Social Security. It may be more important (well, I think it is more important) than life insurance. So you really need to look at your situation and what happens if you cannot work. Who will replace that income? How will it be replaced?
Look at Disability Insurance Resource Center: www.di-resource-center.com. You can look up that information. It will give you all kinds of stats and guidelines on disability and where to do a search. Start thinking about whether or not you need disability insurance in addition to depending on Social Security.