Financially, a disability is anything that keeps you out of work for an extended period of time. The insurance industry splits disability into two categories:
- Short Term: up to 18 to 24 months in duration
- Long Term: over 18 months in duration
Workmen’s Comp insurance in some states provides some income protection against short term disability. In NJ, there is a short term disability benefit which cannot exceed 75% of the Statewide Average Weekly Wage (SAWW) regardless of the individual worker’s income. If the worker makes less, the benefit is limited to 70% of normal income.
Not all states have these programs, and the benefits are limited to on-the-job injuries. Fall off a ladder at home or get a serious illness, and you’re on your own. Cancer, anyone?
Social Security can provide some benefits for long term disability. However,
- Social Security Disability is for illnesses lasting at least 12 months. If you’re out of work for 11 months, you can’t get anything.
- The average Social Security Disability payment (June 2016) is $1166. Is that enough to cover your monthly bills? And the payment is subject to income tax withholding.
Unless you have substantial savings and investments, prudence says you need supplemental health insurance and short term disability.
Long term disability typically happens to people age 50 and older. Short term disability can happen any time. Anyone who has a long term disability will need short term disability insurance to get through at least the first year. However, a lot of people who need short term disability insurance won’t need long term insurance, because the disability will end before long term would take effect.
Are you buttoned up?
State of NJ Department of Labor. http://lwd.dol.state.nj.us/labor/wc/workers/benefits/benefit_index.html
Social Security Administration