Disability Income (DI) Insurance – FAQ’s
By Insurance Suffolk Brokerage
“Do I need individual DI coverage?”
It depends. To best determine this, obtain the following information:
- – First, understand the difference between Disability Benefits Law (DBL), group short term disability and group long term disability (LTD).
- – Does your employer offer you group short term disability and/or LTD coverage? No law mandates that employers provide these and they are typically funded by the employee (if your company offers it)
- – Find out from your employer how much income you will receive if you become disabled. Most employee-funded, group disability insurance only covers up to 50%-66% of your monthly income
- – If the total monthly disability benefits received through your employer is not enough to pay your monthly bills, you need individual DI coverage
“Doesn’t Social Security Disability Insurance (SSDI) cover me?”
Typically yes but not at full salary (the monthly average is just over $1000). Contact your local Social Security Administration Office to find out if you would qualify for SSDI if you were to become disabled (www.ssa.gov). Be advised, it can take months or years to be approved for an SSDI claim.
“Doesn’t Workers Compensation cover me?”
Yes, for job-related disabilities only and usually only pays half to two-thirds salary. Most disabilities do not qualify for Workers Compensation however.
“What is the difference between the Waiting Period and the Benefits Period?”
“What should I look for in a DI policy?”
The Waiting Period is the time between when you became disabled and when the DI policy starts paying you benefits. The Benefits Period is the time you start receiving benefits under the DI policy until the policy stops paying benefits. You choose these periods when you apply for the policy, which in part, affects the cost for the policy.
- – Policies vary. Find out what a policy’s definition of a disability is. Some pay if you cannot do your regular job, others pay only if you can’t work at all
- – Determine the extent of disability (total or partial). Some policies require a total disability to receive benefits. Partial disabilities may only cover you for a limited time
- – Residual Benefits: This feature is built into some policies; others have a rider available for it
- – Presumptive Disability: Does the policy pay full benefits whether or not you are able to work for loss of sight, hearing or loss of limbs?
“How are DI benefits taxed?”
Generally, benefits received from individual disability policies (paid for with after-tax dollars) are not taxable. Conversely, benefits received from employer-paid, group disability policies ARE taxable. Always check with your tax advisor for up-to-date rules on taxation of disability benefits.
As with all insurance, always speak to your doctors, financial advisors or informed friends or relatives before making a decision on coverage.