Did you know that according to The Social Security Administration, 1 in 4 workers will become disabled during their working years? If you sustain a disability, both state or federal disability insurance and private disability insurance are viable options to lessen your economic hardship. Navigating the intricacies of disability insurance can be quite challenging so we’ll give you an overview of your options to know which is best for you.
State Disability Insurance
State disability insurance is only available in select states including California, Hawaii, New Jersey, New York, and Rhode Island. These programs are for claimants who are totally disabled claimants on a short-term basis. Each state has different requirements to be eligible for their disability insurance programs. Some typical parameters for eligibility include the length of time you have worked for your employer, how long you’ve been disabled before you can apply, and what percentage of your salary will be paid out. If your state doesn’t offer insurance, you may qualify for federal Social Security Disability Insurance.
Social Security Disability Insurance
Social Security Disability Insurance (SSDI) is only available to those who have paid into it. This means that you have contributed through payroll deductions. SSDI is available for people with both short-term and long-term disabilities. According to The Patient Advocate Foundation, “To receive SSDI, your application must show that you can no longer work in your previous occupation, you cannot adjust to a new work environment, and your disability prevents you from being able to return to work for at least a year.” There are no time limits for how long you can receive benefits.
Private Insurance
Private insurance is paid for by the employee in the form of premiums, usually collected monthly or deducted from your paycheck. Private companies sell many different types of disability insurance, so it’s important to review your plan. Most private insurance will allow for partial disability. Unlike SSDI, there usually are time limits for how long you can receive benefits for private insurance, depending on whether you have short-term disability or long-term disability insurance.
Since most private insurance is tied to your employer, see if you can take your insurance policy with you if you leave your employer. If your private insurance is portable, you’ll continue to pay the premium, even if you leave your job.
Can I Receive Multiple Benefits?
Yes, in some cases you can receive benefits from SDI or SSDI and private insurance. The amount that you receive from SSDI or state disability insurance will not decrease. However, private insurance policies may decrease your payout of benefits based on the amount that you are receiving from state disability insurance or SSDI. So, your monthly amount of benefits may be the same. Again, every private plan is different so contact your insurance company about your plan.
Are Benefits Taxable?
SSDI are typically not taxable income. The same is true for state disability insurance. If you are receiving unemployment benefits when you apply for disability however you may be taxed. This is because unemployment benefits are taxable and your disability insurance is seen as a substitute for you unemployment benefits. Private disability insurance is also not taxable because your premiums are paid with wages that have been taxed.
Can I Transfer My Policy?
As a rule, disability insurance can’t be transferred to another person. It is possible to designate a representative who manages your care. They may need to be interviewed or go through additional steps to manage your benefits for you.
If you move, your SSDI can be transferred to a new state. Of course, state disability insurance requires you to live in eligible states. Private insurance should also be notified of a move.
Choosing The Right Disability Insurance
Now that you have an overview of the insurance options that may be available to you, you can make an informed choice about which is best for you. You can always contact your state or social security office for more information about state and federal programs. An injury lawyer or your employer’s HR department may also be able to assist you.
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