Employee Benefits | Disability Insurance aka Paycheck Protection |
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Employee Benefits | Disability Insurance aka Paycheck Protection |
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Say "disability" and many people think of the Americans With Disabilities Act, which protects people with chronic conditions or ailments against discrimination. But not all disabilities are immediately obvious. Nor are they all permanent. Many people who suffer devastating injuries, such in an automobile accident, or from on-the-job or at-home accidents, are considered disabled while their injuries are being treated and during the convalescent periods which follow the treatments. In time, most people will recover from these injuries, so their disabilities are temporary. Disability insurance, or paycheck protection as some people call it, helps you pay your bills and put food on the table while you are recovering from a serious illness or injury. The insurance may provide permanent coverage or only temporary coverage. Most insurance companies which offer disability coverage provide long-term and short-term coverage. The long-term coverage picks up where the short-term coverage leaves off. Disability insurance is viewed by many people as a replacement for your paycheck. It is not. Most, if not all, disability policies only promise to pay a maximum of about 65% of your gross pay. While that may come close to matching your take-home pay, it may not. So, you don't want to end up on disability payments for long periods of time (especially considering that you don't get evaluated for raises as when you are on the job). Disability insurance may be offered as a separate policy or as a rider on an accident policy. You may have some flexibility in determining how much benefit you pay for. That is important because, as the benefit rises, so does the premium. Some people look at the maximum benefit and decide not to pay the premium because it's too high. If you have the option to enroll in a disability insurance plan, look at different options to see if you can find a premium you are comfortable with. Disability policies usually have some sort of waiting period. That is, they may not begin to pay benefits until you have taken all your sick leave. Or they may make you wait longer. The longer the waiting period, usually the less your premium is. But you need to discuss the limitations and options of whatever disability is offered to you with your enroller. The people most likely to take out disability insurance are, believe it or not, people who live from paycheck to paycheck. That paycheck is often all that stands between their families and the street. While these are not necessarily lower-income people, many people in low-paying jobs feel comfortable buying disability insurance. Often enough, they know someone who has been injured and rendered unable to work for several months. You cannot simply file for Social Security disability as soon as you are considered disabled. The waiting period for Social Security Disability extends to several months, and their requirements are very rigid. Insurance companies pay close attention to who applies for and receives disability. Some people try to cheat the system, and they get caught. Often, you not only lose your coverage and have to repay the benefits, you may also face criminal charges for insurance fraud. Prison sentences vary from state to state but usually from from a few years to about 25 years. Disability is not a free ride. Remember, as with all insurance coverage, all the benefits come from the premiums people pay for their policies. So, the more fraud that goes undetected, the more premiums pay have to unnecessarily pay the insurance companies. If you don't have enough money invested to get you through the next six to twelve months should you become too disable to hold down a job, what will happen to you, your family, your home, and your car? Disability insurance, or paycheck protection, is an option many people who have little or no resources to fall back on turn to. If you think you can get Social Security Disability, keep in mind that there may be a five-month waiting period (check with the Social Security Administration to be sure of current requirements). If you think Workmenss Comp will take care of you, be sure you are actually covered by it and learn what the current requirements in your state are. Sick Leave is treated as a very short-term disability benefit by some insurance companies. Comp Time may also be treated that way. Hence, if you have accumulated considerable Sick Leave and/or Comp Time, Disability Insurance may not be a good idea for you. But if your employer offers little or no Sick Leave and no Comp Time, you may very well want to provide yourself with some insurance. Disability policies are usually flexible in determining how much money you'll receive as a monthly benefit. Coverage is usually sold in increments of $100 up to about 60% of your gross pay. If you purchase a Disability policy using after-tax dollars, your benefit will not be taxed (check with the Internal Revenue Service and your state and local government to be sure of current regulations). So, 60% of your gross pay isn't usually much less than your normal take-home pay. But many people purchase less than 60% coverage to keep their premiums low. |
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