The High Probability of Disability

According to a study done in 1993 by the Unum Life Insurance Company of America
titled Disability management:  Costs and Solutions:
       1.    In 1990, employers reported slightly more than 60 million lost workdays from
              occupational injuries and illnesses.
       2.   Three out of 10 working individuals between the ages of 35 and 65 were disabled
              for 90 days or longer.
       3.   Almost one in five individuals between the ages of 35 and 65 will become
             disabled for five years or more prior to turning 65.
       4.   For people under age 65, the probability of disability is higher than the probability
             of death.  A 32 year old is 6.5 times as likely to suffer a disability of 90 days or
             more as he or she is to die.

What is Disability Insurance?

Disability income insurance is designed to indemnify the insured for income lost when
they cannot work. If you suffer a prolonged illness or injury that prevents you from doing
your job, this insurance is meant to supplement the income that you otherwise cannot
earn. These policies can be found through group employer coverage or a stand-alone
individual policy.

Loss of Income is the Worst Type of Loss

Think about this. When you get into an accident with your car, or your home is damaged
or destroyed, it can be replaced. This isn’t to say the loss is any easier to handle, but these
policies ensure that the asset is able to be repaired or replaced. If you become sick and
need medical attention, medical insurance covers most or all of that expense as well.
But what happens when you become seriously injured or sick to where you cannot
perform your job? If you don’t have any insurance protecting that loss of income, it can
be devastating to your finances. How long could you go without income? If you have an
emergency fund, hopefully you could make it a few months, but what happens if you are
unable to work for three, six, or eight months or more? The loss of income undermines
your ability to obtain and maintain all of your other financial needs.

II'm Not Worried, Social Security Has Disability Coverage

This is one of the worst assumptions you can make. Yes, it is true that Social Security has
a disability benefit, but there are some major problems surrounding the program. Even if
you do qualify for Social Security disability, the benefits are usually not sufficient for
most people.
What is even more important to consider is the ability to even qualify for benefits to
begin with. Social Security uses a very strict definition of disability that says your
disability must make it impossible for you to perform “any occupation“. If your job
requires the use of your legs and you find yourself in a wheelchair due to an accident,
don’t expect Social Security’s disability to kick in. Since you may have perfectly working
hands, arms, and upper body, there are plenty of jobs out there that you could do, so you
are more than likely going to be denied.

To better understand how strict Social Security is when it comes to qualifying, they define disability as:

The inability to engage in any substantial gainful activity by reason or any medically
determinable physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not less than 12
months. A person must not only be unable to do his or her previous work, but cannot,
considering age, education, and work experience, engage in any other kind of substantial
work which exists in the national economy. It is immaterial whether such work exists in
the immediate area, or whether a specific job vacancy exists, or whether the worker
would be hired if they applied for work.
To make matters even worse, Social Security disability benefits have a five-month
waiting period, otherwise known as an elimination period. Even if you are “fortunate”
enough to be qualified for a benefit, you’ll have to wait five months before receiving
anything at all, plus the amount you do receive will likely only be a fraction of what your
income used to be. That is a situation most people simply can’t afford to be in.
 
Social security Benefit Questions
 
Eligibility
To be entitled to a disability benefit, a worker must:

     1.  Be fully insured at the onset of disability.
     2.  Have worked in Social Security-covered employment for at least five of the
          previous ten years (20 out of 40 quarters). This applies to disability that begins
          after age 31. If the disability begins before age 31, you must have worked under
          Social Security-covered employment for the greater of six quarters, or at least
          one-half of the quarters between age 21 and the age when disability began.
     3.  Be under Social Security normal retirement age. After normal retirement age,
          disability benefits become retirement benefits.
     4.  Have a physical or mental impairment that (1) disables the worker from the
          performance of any substantial work, and (2) is expected to either be terminal or
          last for at least 12 months

Benefits

A disabled worker who qualifies for Social Security disability benefits is entitled to the
full benefit payable until the earliest of the following:
     1.  The disability ends: benefits are terminated in the second month after the end of disability.
     2.  The worker dies: benefits are terminated in the month prior to the worker’s death (e.g., worker dies in July; no June benefit is paid).
     3.  The worker attains normal retirement age.
Spouse’s benefit. Disability benefits for spouses are calculated in the same way as
retirement spousal benefits: 50% of the worker’s benefit, reduced if the spouse is under
normal retirement age. Benefits are subject to a family maximum.
Child’s benefit. A child who is under age 18, or under 19 if still in high school, is
eligible for a benefit amounting to 50% of the disabled worker’s benefit, again subject to
the family maximum. http://www.ssa.gov/planners/calculators.htm
But how much money would you receive even if you do qualify? Well, the Social
Security Administration has a few nice calculators .
Go to  (http://www.ssa.gov/planners/calculators.htm)You will be amazed at how pitiful the benefit would be if you were really unable to work.
Go ahead, plug in your numbers and see what it comes up with. I don’t know about you,
but even in the rare event I was able to qualify for this disability benefit, my life would
certainly not be the same while trying to live on a fraction of my pay.