In the US a disabling accident occurs on average once every second. Nearly 18.5% of Americans are currently living with a disability, and 1 in 4 persons in the US workforce will suffer a disabling injury before retirement.
What Is Disability Insurance Income
Disability, often called DI or disability income insurance, provides income when a disability prevents a worker from performing his or her work due to physical or psychological impairment.
The general term disability insurance encompasses:
- Paid sick leave
- Short term disability benefits
- Long term disability benefits
National Social Insurance Programs
The single most important form of disability insurance is that provided by the national government for all citizens, in the United States it is called Social Security (SS).
The following Social Security programs provide a floor beneath all other disability insurance:
- Social Security Disability Insurance (SSDI)
- Supplemental Security Income (SSI)
SSDI and SSI are a safety net that catches those who are uninsured or underinsured, paying enough benefits to prevent abject poverty.
Social Security Disability Insurance (SSDI)
SSDI (also called SSD) is a payroll tax-funded, US federal insurance program, managed by the Social Security Administration. It is designed to temporarily or permanently provide income to people who are physically restricted in their ability to work, due to physical or mental disability.
A disabled person at any income level can receive SSDI, and the monthly amount a recipient receives is based on an average of past earnings. A person may return to work while still receiving SSDI benefits, without those benefits decreasing.
Most SSDI applicants hire a lawyer to help them apply or appeal. Having a disability representative earlier in the process improves chances of benefit approval. The initial benefits application will take 90 days to 8 months to complete, and the appeals process for denied filings can take 90 days to over a year to get a hearing.
Supplemental Security Income (SSI)
SSI is a United States government program, funded by the U.S. Treasury general funds, that provides stipends to low-income people who are either aged 65 or older, blind, or disabled. Disabled means unable to engage in substantial gainful activity (earning $1040 gross monthly income or $1740 gross monthly income if blind) due to physical or mental impairment, which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.
Income must be below certain limits, based on the state in which the individual lives, his/her living arrangement, the number of people living in the residence, and the type of income.
To receive SSI benefits, an individual’s resources must be below a certain level. Since 1989, the limits have been $2000 for individuals and $3000 for couples. Under current law, they will remain at present levels indefinitely.
State Funded Disability Insurance Programs
The following states also currently offer state funded short term disability insurance programs, determined by the applicant’s level of income 12 months prior to application:
- New Jersey
- New York
- Rhode Island
Employer-supplied Disability Insurance
Your employer is required to purchase Workers’ Compensation insurance that will pay if your disability is due to an on-the-job injury. Some employers also provide short terms disability insurance policies at no cost to employees who are disabled due to non-work-related injuries or conditions.
Workers’ Compensation insurance
Worker’s Comp offers payments for a limited period of time to employees unable to work due to on-the-job injuries. It compensates for:
- Past and future economic loss
- Reimbursement of payment of medical expenses
- Benefits payable to dependents of workers killed during employment, as a form of life insurance
Compensation and insurances provided to military veterans by the US Department of Veterans Affairs (VA) are analogous to workers’ compensation, with soldiers, sailors, airmen and marines as workers. The VA provides multiple types of insurance that are limited in scope:
- Health insurance
- Disability income insurance
- Life insurance for survivors of veterans killed while serving
- Mortgage insurance
Individual Disability Insurance
If your employer does not provide benefits for non- work-related injuries or you are self-employed, you may purchase individual coverage, either short term or long term. Premiums will generally be higher for individual policies that provide more monthly benefits, offer benefits for longer periods of time, start paying benefits more quickly following a disability claim, or pay benefits in a wider variety of circumstances.