Disability Insurance

Disability insurance provides partial wage replacement if you become injured and are no longer able to earn an income at your previous job. You can apply for coverage through state or federal programs but can only qualify for Social Security Disability Insurance (SSDI) if you've worked and paid enough into Social Security through taxes for your age at the time of disability. Private disability insurance for individuals may provide more customizable and long-term coverage.

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Aug 19, 2021

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Overview

  • Disability insurance is available through the Social Security Administration, state-funded programs, and private insurance companies.
  • Short-term disability coverage is provided for temporary situations, such as recovery time after a planned surgery or treatment of an illness or injury.
  • Long-term disability is available for individuals who are not able to perform any type of substantial gainful activity for at least a year and likely will be unable to in the future.

Whether you need to miss work due to pregnancy or are no longer able to perform any type of work-related tasks due to a serious illness or injury, there is disability insurance to replace lost income.

For long-term illnesses, many individuals seek disability insurance benefits through the Social Security Disability Insurance program (SSDI), while others turn to their employee-sponsored or private insurance provider for short-term or long-term wage replacement needs.

If you’re seeking compensation from Social Security disability insurance or a private insurance company, a disability insurance lawyer has the necessary experience with insurance law and its claims process to help you get the wage replacement benefits you need.

Need to get in touch with a disability insurance attorney today? Enter your ZIP code above to find affordable insurance lawyers in your city today.

What is disability insurance?

While most people are familiar with health insurance, which provides coverage of all or part of the expenses related to health care and medical treatment, disability insurance provides coverage of a portion of your income if you become injured or ill and are unable to work.

How does disability insurance work? You can obtain benefits in the following ways:

  • If you’ve worked and paid enough into Social Security through taxes for your age at the time of disability, you can obtain Social Security Disability Insurance benefits by applying for them and presenting the required medical and work evidence to prove eligibility.
  • If you are seeking wage replacement benefits through your private disability insurance policy, you must file a claim and provide the necessary medical and employment information required by your provider.

How you apply for and receive disability insurance benefits will depend on whether your policy is through a government-run program, a private insurance policy, or an employer-sponsored benefits program.

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What are the common types of disability insurance?

When hearing the words “disability insurance,” many people think of federal disability benefits that are available for those who have met the work eligibility requirements. Others think of insurance policies provided as part of an employee benefits package.

The truth is, both of these are examples of the different types of disability insurance that are available. Here is a closer look at the federal, state, and private disability insurance options available to you:

Federal Disability Insurance

The federal government provides disability insurance for individuals who are unable to work through its Social Security Disability Insurance (SSDI) program, as well as its Supplemental Security Income (SSI) program to qualified earners and certain family members.

Eligibility for both of these programs hinges on your age at the time of disability and the number of quarters you have worked and paid into Social Security, as well as how recently you worked. The SSDI program provides wage replacement benefits for individuals who have a disability that is expected to last for at least a year or to result in death. The SSI program provides supplemental income benefits for individuals who are disabled and have limited financial resources.

In order to obtain SSDI benefits, you must submit an extensive amount of documentation on your employment history, your current employment, and the wages you were earning before the disability occurred, as well as information about your medical or psychological diagnosis, treatment, and prognosis.

State Disability Insurance

Five states currently offer a disability insurance program along with Puerto Rico, including:

  • California disability insurance provides a portion of wages through state disability benefits of up to 6 weeks of paid family leave, or 52 consecutive weeks of medical leave.
  • Hawaii, where residents who are unable to work due to injury can receive up to 26 weeks of disability pay.
  • New Jersey, where applicants can obtain up to 26 weeks of medical leave or up to 42 days of paid family leave.
  • New York, where residents can seek wage replacement for up to 26 weeks after incurring a disability.
  • Puerto Rico, which also provides up to 26 weeks of disability coverage.
  • Rhode Island, where individuals can seek up to 30 weeks of disability pay.

States providing disability insurance have their own requirements regarding how long an individual must wait before receiving benefits and the maximum amount of benefits they are eligible to receive according to their income and time worked.

It should be noted that state disability insurance is a different program than a state worker’s compensation program. Worker’s compensation provides medical coverage in addition to wage replacement, but only for work-related injuries and illnesses. Disability insurance provides wage replacement benefits for individuals who are unable to work due to an illness or injury that is not work-related.

Private Disability Insurance

With these types of policies, the insured selects the amount of disability insurance he or she wishes based on how much they would need to pay all necessary bills, including housing and utility costs.

It is generally recommended that you obtain a disability insurance policy with a high enough limit to provide 60% replacement of your income for the time you are disabled.

Additional add-on coverages are usually available, including unemployment premium suspension, a waiver of the premium during the time you are obtaining benefits, and hospice care benefits such as a waiver of the policy elimination period, which means you will receive your benefits sooner.

The pros of purchasing a private disability insurance policy over receiving one through your employer or applying for federal or state benefits include:

  • If you apply while you’re healthy, you will have more options and can even lock in your pricing.
  • If you purchase your own individual policy, you can take it with you when you change jobs.
  • You can customize your coverage, with options including increases to benefits for the cost of living adjustments, and add-on coverages that will replace your retirement account contributions or pay your student loans if you are unable to make those payments due to injury or illness.

For these reasons, private insurance policies are recommended when shopping for disability insurance for business owners due to the ability to customize coverage to meet the unique financial obligations of owning a business.

Most private insurance carriers offer several disability insurance policies, including those that are obtained through employers as an employment benefit, as well as individual disability insurance plans.

What types of benefits are provided through disability insurance?

The main benefit provided through disability insurance is the replacement of wages that one loses if he or she must miss work due to an injury or illness.

The SSDI program will provide these benefits for an eligible worker’s family members, in some instances, and also makes other programs available for recipients as well, including the Supplemental Nutrition Assistance Program (SNAP), and medical coverage through Medicare after 24 months of receiving wage replacement benefits.

Private disability insurance programs also provide additional benefits depending on the type of policy that was purchased. Those benefits can include occupational training and assistance with applying for SSDI if your disability becomes long-term.

Short-Term Disability Insurance Benefits

Short-term disability policies provide wage replacement for injuries, illnesses, and other medical situations that will require you to miss a few days or even a few months of work.

Some situations where an individual will commonly seek short-term disability benefits include:

  • During pregnancy and for the first several weeks after giving birth to a child.
  • While recovering from a temporary injury, illness, or surgery.
  • When suffering from depression.
  • When seeking treatment for alcoholism or other addiction.

Short-term insurance policies generally provide 40%-70% of lost income for up to 26 weeks.

Long-Term Disability Insurance Benefits

Long-term disability helps you to meet your monthly living expenses during an extended recovery from an injury or illness, with a portion of your salary being paid to you during the duration of the time you are injured, ill, or recovering.

Private long-term disability insurance plans vary, but generally provide benefits for up to five years or even until the recipient reaches retirement age. These plans typically replace 40%-60% of the wages that the individual would have earned from working with a usual elimination period of 30, 60, or 90 days.

In some cases, individuals must wait six months to a year to begin receiving benefits after filing a claim.

How can a disability insurance lawyer help you?

A disability insurance attorney is a legal professional who is well-versed in the laws that regulate the provision of insurance and how to get benefits. This allows them to provide specialized services aimed at ensuring your right to the insurance benefits you have earned and are entitled to receive.

Some specific services a disability insurance lawyer can provide for you include the following:

  • Assistance with applying for SSDI benefits, including reviewing your medical information to ensure that you have the documents necessary to prove your disability.
  • Filing a claim with a private insurer or with your state’s disability insurance program.
  • Appealing a claim denial or an unfavorable decision from the Social Security Administration or state insurance board.
  • Dealing with bad faith insurance providers who will not provide you with the benefits you are entitled to receive.
  • Exploring other programs through which you can receive additional assistance.

The above information should help you navigate the process of obtaining disability insurance coverage or filing a disability insurance claim. If you need legal advice or have questions for a disability insurance lawyer, enter your ZIP code below to find affordable disability attorneys near you.

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Frequently Asked Questions about Disability Insurance

Below are some commonly asked questions about disability insurance and disability insurance law:

#1 When am I considered disabled?

For SSDI or SSI purposes, the federal government considers an individual disabled if they have an impairment, either medical or psychological, that prevents them from doing a substantial amount of work for at least one year.

The term “substantial amount of work” refers to the ability to earn an income of over a certain minimum amount which changes annually to reflect the cost of living. This is also referred to as “substantial gainful activity.”

Determining whether or not you are disabled to receive long- or short-term disability benefits through a private plan will depend on the eligibility requirements of the policy you or your employer purchased.

Some policies will consider you disabled if you have incurred a long- or short-term situation that will require you to miss work, while other policies only pay if you are unable to perform any type of work made available by your employer regardless of whether it is within the normal scope of the duties you were hired to perform.

#2 How long will my insurance benefits last?

Short-term disability payments are only provided for a limited period of time, depending on which is shorter: the time it takes for you to heal from your temporary disability and return to work, or by a set deadline. The deadline for receiving short-term disability through a private plan is often two years.

Long-term disability is often provided until the recipient reaches the age of 65, at which point federal disability benefits are usually converted to Social Security retirement benefits.

#3 What information will I need to provide in order to file a claim?

Generally, you will want the name and contact information of all physicians who are providing treatment for your disability, as well as a written statement as to the prognosis of your disability and any instructions your physician has provided to you about your activity limitations.

You will also have to furnish information about your income, and your insurer or the Social Security Administration can request an independent medical exam in order to have a third party evaluate you to ensure the validity of your claims.

#4 Is there a waiting period for SSDI benefits?

According to the Social Security Administration, there is usually a five-month waiting period before an individual’s benefits begin. The payment of SSDI benefits commences on the sixth full month after the administration has been made aware of your disability.

The elimination period for benefits you are seeking from a private disability insurance policy will generally be 30, 60, or 90 days after you file your claim.

#5 Will receiving SSDI benefits impact other benefits programs I am already participating in?

After you receive SSDI benefits for 24 consecutive months, you will be eligible for medical coverage through Medicare. Depending on your income and other factors, you can also apply for SNAP (Supplemental Nutrition Assistance Program), as well as SSI, which is an additional benefit provided to individuals who are blind or disabled.

Some benefit programs, such as disability benefits from the Veteran’s Administration and other programs, can impact the amount you are eligible to receive from SSDI. An experienced disability lawyer can explore options with you for benefit programs that can work together with SSDI to supply the benefits you need.

#6 Do I have to pay taxes on my disability insurance benefits?

SSDI payments can be subject to tax if the individual earns over the minimum taxable amount in a given year. However, because most people are not permitted to earn over a certain income monthly to qualify for the benefits, this rule impacts very few people unless they are also receiving benefits from other programs.

With private disability insurance benefits, whether you are taxed depends on who paid the premium. If your employer covered your premiums, then the benefits you receive are taxable to you.

If you paid the premium, the tax you owe on the benefits depends on whether you used pre-tax or post-tax income to pay the premium. If you used pre-tax income, then the federal government has not yet taxed those earnings and will likely do so when you file your taxes.

Commonly Used Disability Insurance Terms

Applying for disability insurance is a process that often involves the use of words and acronyms you haven’t heard of or are unsure of their meaning.

Here is a look at some of the words and phrases you will likely encounter as you seek your disability benefits:

  • Attending Physician’s Statement (APS): This is a report by the doctor or facility who treated you that is necessary when considering your private disability insurance claim that details the current state of your health and the medical issue for which you are receiving treatment.
  • Benefit: The amount of money you are owed each month by either the Social Security Administration, the state disability insurance program where you live, or the private insurance policy you have for the time you are unable to earn an income.
  • Claim: While you apply to receive government disability insurance benefits, if you have a policy with a private insurance company, you can only obtain your benefits by filing a claim that details the nature of your disability and the treatments you are receiving.
  • COLA: The Cost of Living Adjustment: The annual increase to SSDI benefits that is provided accounts for the annual increase in the cost of living. The Social Security Act specifies a formula for calculating COLA based on increases to the Consumer Price Index for Urban Wage Earners and Clerical Workers, which are calculated monthly by the Bureau of Labor Statistics. With private insurance policies, you can purchase an add-on COLA to protect your ability to pay your expenses despite inflation.
  • Elimination Period: This is the waiting period between the time that you apply for federal benefits and when your first payment is made. The elimination period also exists when filing a claim on a private disability insurance policy.
  • Exclusion: These are the instances when a private disability insurance carrier will not have to provide benefits. For example, your disability insurance policy can have exclusions from providing benefits if you are injured while partaking in a dangerous activity such as skydiving.
  • Group Disability Insurance: This is very similar to insurance coverage you would obtain through your employer. However, Group Disability Insurance is generally offered through a group or organization, such as a union.
  • Pre-Existing Condition: This term refers to any medical condition you had before you purchased your disability policy. With private insurance policies, pre-existing conditions can be excluded from coverage.
  • Presumptive Disability: This is a term that is used by private insurance carriers to expedite the elimination period and get funds into the hands of the insured more quickly following a sudden and drastic disability such as the loss of both eyes or the loss of use of multiple limbs.
  • Residual or Partial Benefits: These are partial wage replacement benefits provided when you are too injured to perform the tasks of the position you normally work in but can still perform work-related tasks for a lower-paying position. Partial benefits help to replace the difference between the income you were earning before you became disabled and what you make at the lower-paying position.
  • Substantial Gainful Activity (SGA): This is a term used by the Social Security Administration to refer to an individual’s ability to perform any work task, whether necessary for his or her specific position, that can result in the individual being able to work and earn an income sufficient to meet his or her basic financial needs.

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