By Steve Jacobs
No one wants to think about disability insurance, let alone use it. But if something happens, it’s best to be armed with the knowledge of why it exists, when you can use it and, most importantly (as you deal with your disability), what resources exist to help you through your claim.
First of all, what is disability insurance? Essentially, it’s coverage that can help replace income you lose while you’re disabled – usually about two-thirds of your regular pay.
“The basic idea behind disability insurance is that you should have something in place for when an emergency lasts longer than you might have anticipated,” says Sean Scaturro, CERTIFIED FINANCIAL PLANNERTMpractitioner and USAA advice director. “Major medical insurance wants you back on your feet as soon as possible, but if whatever happened is something that can’t be immediately or acutely treated, you’re going to have out-of-pocket expenses.”
Scaturro adds that this is why you should have savings of 3-6 months of your income, just in case.
As for when it can be used, there’s typically an elimination period between the “qualifier” – the event that caused the disability – and when disability insurance kicks in. If you have a stand-alone plan or long-term disability coverage, you want to understand how long your elimination period is, as it’s essentially the disability equivalent of a health plan deductible.
Ask yourself the following questions:
• What’s the nature of my disability and will it impact my return to work?
• Do my benefits pay out retroactively to the date of my impairment or to the day I cleared the elimination period?
• How long will my insurance last?
• How much will my financial gap be and can I afford it?
As for the nature of your disability, if you are injured on the job, there may be a worker’s compensation claim to consider, but that is a topic for another time.
What happens once your insurance kicks in? Typically, it will provide you with a period of reduced income, about two-thirds of your total pay, which you don’t pay taxes on. There are limitations on how long it lasts, on a policy-by-policy basis. This provides an incentive for people to eventually go back to work.
With everything that happens surrounding a traumatic event, many people may want additional support. Luckily, there are ways to get help.
If you have a plan through your employee benefits, you’d usually go through your human resources coordinator. They will also be able to help you understand what will happen with your job while you’re away. The Family Medical Leave Act (FMLA) offers some employment protection in this sense, but it’s important to understand the rules. If you have a stand-alone disability plan, you’d ask your questions directly to the carrier.
And if you want additional resources from a neutral party, visit disabilitycanhappen.org to learn more about this protection.
You shouldn’t think of disability insurance as something that gets tacked on to your other coverage. In reality, it’s an important part of an overall protection plan and one that’s essential to know about in advance, in case anything happens to you.
If you need help being financially ready in case of an accident, visit usaa.com to see the coverage we offer.
Accidental injury insurance provided through USAA Life General Agency, Inc. (LGA) (known in CA and NY as USAA Health and Life Insurance Agency), which acts as an agent for select insurance companies to provide products to USAA members. LGA representatives are salaried and receive no commissions. However, LGA receives compensation from those companies, which may be based on the total quantity and quality of insurance coverage purchased through LGA. Plans not available in all states. Each company has sole financial responsibility for its own products.
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