Only a third of Americans have long-term disability insurance most people rely on Social Security Disability Insurance SSDI paid through FICA taxes if they become disabled.
But according to Allsup Inc., the nation's leading SSDI representation company, few people really understand how important it is to their financial plan if they become disabled.
"Nearly three in 10 workers entering the job market today will become disabled before retiring," said Edward Swierczek, an Allsup senior claims representative. "Unfortunately, few individuals think about what that will mean to them or their families, not only in terms of lost pay, but also the impact on their medical benefits, health insurance and retirement savings. Obtaining your Social Security Disability Insurance benefits has a pivotal impact on your financial future and is the first step in helping to secure your finances if you become disabled," he added.
According to Swierczek, there are several reasons why it is essential that workers should better understand SSDI and why an eligible person should apply for these benefits. He further emphasizes that applying as soon as possible is crucial because more than 1.4 million Americans are currently awaiting decisions on their SSDI applications. Average time to get through the process is about two years.
Among the most important financial planning aspects of applying for SSDI are:
Increased Monthly Income: Social Security provides a regular monthly payment that includes an annual cost-of-living increase. This may supplement any current disability insurance benefits a person is receiving. If a private disability insurance plan includes a Social Security offset rider, the individual may be required to apply for SSDI in order to comply with the private insurer's requirements. Additionally, all or a portion, of SSDI benefits may be tax-free at the federal level, and the majority of states do not tax Social Security disability benefits.
COBRA Extension: Generally, if you leave your job, you, your spouse and dependents may continue to receive health coverage at group rates through your employer for up to 18 months under COBRA. However, if you have a ruling from the Social Security Administration that you became disabled within the first 60 days of receiving COBRA coverage, and you provide this to your former employer before the 18-month coverage expiration, you and your family may be able to continue COBRA coverage for an additional 11 months. While plans can charge 150 percent of the premium cost for the extended period of coverage, this still may be an essential financial planning component for individuals unable to get any other insurance and face mounting health care costs.
Medical Benefits and Prescription Drug Coverage: Regardless of your age, after receiving SSDI benefits for 24 months, you are eligible for Medicare, including Part A (hospital benefits) and Part B (medical benefits). Additionally, once you are entitled to Medicare, you also are eligible for Medicare Part D, the prescription drug plan.
"Many individuals with disabilities have costly ongoing health issues, with millions of bankruptcies each year attributed to illness and medical bills," said Swierczek. "So, the sooner a person starts receiving SSDI benefits, the sooner he or she is eligible for Medicare, helping to alleviate some of the financial hardship of being disabled."
Protected Retirement Benefits: Even before providing income as part of SSDI in 1960, the federal government in 1954 began providing Social Security disability entitlement 'freezes,' whereby earning records would not be factored into an individual's Social Security retirement benefit during his or her period of disability.
"If you do not obtain SSDI while you are disabled, this can have a significant impact on what you will be entitled to under Social Security during your retirement years, potentially reducing your retirement benefit by thousands of dollars each year, in addition to foregoing SSDI income during the time you are disabled," said Swierczek.
Dependent Benefits: If you receive Social Security disability benefits and you have a dependent under age 18, he or she may also be eligible for benefits.
Return-to-Work Incentives: Under the Social Security Administration's work incentives program, individuals on SSDI can test their ability to return to work. They continue to receive all benefits regardless of how much they earn during the trial-work period, which continues until they have worked nine months within a 60-month period. In the 36 months after the trial period, they can work and still receive benefits for any month that earnings are not "substantial." In 2007, this is defined as less than $900 or $1,500 if you are blind.
Reference: Allsup Inc. is the nation's premier Social Security Disability Insurance representation company. Since 1984, Allsup Inc. has helped tens of thousands of Americans with disabilities receive their entitled disability benefits. Today, the company has about 435 professionals focused on helping individuals and their families gain the financial and health benefits they deserve. For more information, visit Allsup's Web site at www.allsup.com