Just as you have an emergency fund saved up in case an unexpected expense arises, you should also explore ways you can ensure your income stream if you are injured and can’t work.
There are proactive steps you can take, work-related benefits that you might be eligible for, and government disability benefits that you should know about.
This information is from the office of a Philadelphia life insurance attorney Chad Boonswang, Esq.
In addition to a limited amount of paid sick leave, many employers purchase short-term disability insurance coverage for their employees.
This coverage will kick in if an employee is injured off the job and cannot work, and will pay about 50% of income for anywhere from three to six months.
Know that benefits received under employer-paid insurance are taxed to the recipient as income.
Even employees with some employer-paid disability coverage might explore purchasing a private policy.
Long-term disability insurance can pick up where short-term coverage or your emergency fund leave off, typically between 90 days and a year after the incident. This is called the elimination or waiting period.
Benefits from a private disability income policy will replace 50-70% of your income. Because you pay the premiums, those benefits are not taxed. Know that some private disability policies exclude preexisting conditions from coverage.
insurance can be a stand-alone policy, purchased as a rider to a private term life insurance policy, or purchased as a rider on an employer’s group life insurance policy.
It provides benefits in an amount that tracks the severity of the injury and is not tied to the amount of income you must replace if not working.
If you are injured at work, you will be covered by your employer’s workers’ compensation policy. Your lost wages and medical expenses will be paid until you heal and can return to work.
However, know that you do not receive 100% of your salary while out of work due to a work-related injury.
You can get paid for performing light duties at work if you are able and such a position is available.
If your injury results in a partial or total disability, you may be eligible for temporary or permanent disability benefits through workers’ compensation. These benefits are tied to the severity of your injury.
If injured in a car accident, your medical expenses can be paid through your auto insurance or the other driver’s auto insurance.
If you have personal injury protection (PIP), that portion of your auto insurance policy may help replace your income.
SSDI and SSI are both federal programs that pay people who cannot work because they are disabled but other than that they do not have much in common.
SSI is meant to meet the basic needs of elderly, blind, and disabled people who would otherwise have a hard time paying for basic needs such as food and shelter.
SSI is a “means-tested” benefit, meaning that to qualify an applicant must meet a strict set of financial requirements.
SSI recipients automatically qualify for Medicaid, which is a comprehensive healthcare program fund by the state and federal governments.
In 2020, the federal SSI payment standard will be $783 per month, with most states adding a small supplementary payment. SSI is reduced by any other income the recipient receives.
SSDI is an entitlement program available to anyone who has paid into the Social Security system for at least ten years. SSDI recipients qualify for Medicare, which is a federal program that has gaps in coverage.
SSDI is based on the beneficiary’s earnings record and varies widely among recipients.
The average SSDI payment in 2020 will be $1,258 a month, with some recipients receiving much more than that.
If you are injured and killed, your life insurance will pay the death benefit you purchased to your beneficiaries.
Many primary breadwinners purchase term life insurance as income replacement for their families should this happen.
Term life insurance is fairly inexpensive, especially if you are in good health and fairly young.
How it works is this: you complete an application and medical questionnaire, and in some cases, submit to a medical exam.
Your insurance company charges periodic premiums that are based on the risk you will die within the term. As long as you make premium payments, you are covered.
To calculate the amount of insurance you need, start with your annual after-tax income, then subtract what you usually spend on personal expenses.
Multiply by how many years of income your family will need if you die. Then adjust this figure upward to pay for expenses such as a mortgage balance, college tuition, or the needs of a special needs child.
Adjust this figure lower if the household has a second income or the children are older and coverage would not be needed much longer.
Don’t leave your family’s financial security up to chance. Anything could happen to you at any time to prevent you from working and supporting your family.
Look into the various types of insurance that can provide for you and for your family should your income stream be interrupted because you are injured.
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