Disability Insurances: Covering Your Lost Income

Disability insurance safeguards your income, which is essential for supporting yourself and your family. While it is related to health insurance, its primary focus is on income protection rather than covering medical expenses. It is as important as life insurance, especially if you have dependents.

Anyone who is employed is at risk of losing income due to sickness or injury. Many employers provide sick days and additional time off that can be utilized as needed. Some may also offer disability income insurance, which compensates for a portion of the income you lose when you are unable to work due to illness or injury.

Disability income insurance is often the most overlooked type of insurance, yet it is crucial for all workers to have this coverage.

Disability insurance is indeed expensive — it generally costs about 1 to 3% of your income, but it is essential. Generally, the more expensive the insurance, the more necessary it is. This high cost is attributed to the likelihood of the insurance paying out at some point. Similar to health insurance, disability insurance is costly because advancements in safety and medicine have increased our chances of survival. However, surviving an accident, such as a car crash at 55 MPH, does not guarantee a full recovery. Decades ago, such an accident would likely have been fatal. Today, thanks to safety features like crumple zones, seatbelts, and airbags, survival is much more likely, though often with significant injuries. The cost of disability insurance also reflects the complex nature of determining disability, given the myriad ways an individual can be deemed “disabled”.

• Short-term disability (STD) essentially comprises two separate insurance coverages for the periods of weeks [0, 13) and [13, 26), both governed by the same policy rules. The details of disability insurance coverage can differ depending on the insurance provider and the requirements of your state. Currently, only California, Hawaii, New Jersey, New York, Puerto Rico, and Rhode Island require employers to provide short-term disability and/or family medical leave. California employees contribute to Voluntary Plan Disability Insurance (VPDI), which provides coverage for the first 52 weeks of disability. This employer-sponsored VPDI typically offers more comprehensive benefits compared to the State Disability Insurance (SDI) plan. All employees in California must be covered by either SDI or an equivalent alternative plan.
• Long-term disability (LTD) covers weeks [26, infinity) of disability.
• Social Security Disability Insurance (SSDI) is a federal program designed to provide income supplements to individuals who are physically restricted in their ability to be employed because of a notable disability. The application process for SSDI can be extensive, often resulting in delayed payments. When these back payments are made, the IRS has specific guidelines for taxing these retroactive benefits. Additionally, SSDI is generally compatible with Social Security retirement benefits, meaning individuals can transition smoothly between the two. In cases where someone has Long-Term Disability (LTD) insurance, they are usually required to apply for SSDI if they qualify.

Depending on your certification, you could receive LTD pay until your Social Security Normal Retirement Age (SSNRA), which varies based on your birth year. Visit the Social Security website for more information.

To qualify for LTD benefits, you must meet the plan terms and provide medical information from your treating doctor(s) detailing your need for disability. Insurer will request the necessary medical documentation on your behalf and determine what is needed to substantiate your leave based on your specific condition. Required medical documentation may include office visit notes, progress notes, treatment plans, and test results. Failure to submit the required medical documentation may result in claim closure. All medical information received by insurer will be used solely to support the determination of your benefits under the plan.

Your doctor must certify that an illness or injury prevents you from performing your job. MetLife will review the information provided by your doctor and notify you if additional information is needed to make a determination on your leave. For more details, refer to the full plan document.

If you meet the plan’s terms and are approved, LTD insurance covers up to 65% of your base pay for medical disability leave lasting more than 182 days. For absences of 182 days or fewer, refer to the short-term disability policy. If your medical provider certifies that an illness or injury prevents you from working, you can take this leave.

You may also be eligible for state-mandated disability programs and job protection under federal and state leave laws, which may run concurrently with Long-term Disability.