Disability Insurance

Social Security.
Social Security disability benefits may be available to eligible individuals prior to the age 65, depending on your salary and how long you have been paying Social Security taxes.

Generally, if you become seriously disabled before reaching age 65 and you have a steady work history, you may be eligible for a monthly Social Security disability payment. The payment may be equal to the amount you would get if you had reached age 62 at the time the disability occurred. Disability benefits generally will increase each year to keep pace with inflation.

Generally, according to present Social Security guidelines, if you become disabled and you've been receiving a reduced retirement benefit or other disability benefit, your disability benefit may be reduced. Disability benefits will generally stop when you reach age 65, and retirement benefits will begin. (Disability benefits will also stop in other instances not discussed in this pamphlet.)

The Social Security administration has very strict definitions of disability. You generally must be unable to engage in substantial gainful activity by reason of a physical or mental impairment that can be expected to result in death or last for at least 12 months. Social Security disability benefits are not intended for temporary conditions. You should also note that Social Security's disability rules are different from those of other government or private programs. So while you may qualify for disability benefits under another program, you are not automatically eligible for Social Security disability benefits.   

If it is determined that you are eligible for Social Security disability benefits, the maximum payment for an insured person in 1996 is about $1,400 a month for a young person earning $62,000 or more a year. Older workers, and those with less income, will get less. There is a 5 month waiting period for benefits. If a disabled worker dies before making an appeal for benefits, the family can do so within three months of the worker's death. Benefit payments may be subject to federal income tax.

If you become disabled, call or visit Social Security as soon as possible to determine your eligibility for this benefit, your spouse's eligibility and that of any dependent children, the amount of your entitlement and the formula used for determining this amount. And, don't just ask, file an application at your local Social Security office. If you are turned down by Social Security, you can appeal. For more information, call Social Security toll-free at 1-800 772-1213 or 1-800 325-0778 (TTY).

To expedite the application process, have the following information ready:

• names, addresses, phone numbers of doctors, hospitals, clinics, etc., where you have been treated and
• a summary of where you have worked in the last 15 years and the kind of work you did.

Riders.
Most insurers also offer several optional benefits to enhance your policy. Among the more common riders are the following:

Cost of Living Adjustment (COLA).
COLA provides for an annual increase in benefits (after you have been disabled for a year) based on either the Consumer Price Index of Urban wage earners (CPI-U) or a redetermined percentage. This helps your benefits keep pace with inflation, particularly if you are disabled for a long time.

Future Purchase Option (Guaranteed Insurability Option).
This rider allows you to purchase additional disability income insurance as your income increases without providing proof of medical insurability. Even if you later developed a condition that would normally prevent you from obtaining additional coverage, you could still increase your benefits.

Residual Benefit.
This pays you a portion of your monthly disability benefit if you have a drop in income due to a disability (for example, if you are working part time). In most cases you need to satisfy a minimum percentage loss in earnings (for example, a 20% loss) to qualify.

Social Security Rider.
If you are disabled, these riders pay you benefits if you are not able to collect Social Security due to their definition of disability. Usually they pay after the waiting period for the policy and during the five-month period (sometimes up to a year) while you are waiting for Social Security to kick in. If Social Security denies your claim, this rider will continue to pay benefits for the duration of the benefit period. 

Before purchasing any riders to your policy, ask yourself these questions:

• How much does this rider cost compared to the benefits I may receive?
• How likely am I to use this rider?
• Would I be able to pay for the benefits provided by this rider out of my own pocket?
• How useful would the rider be if I were disabled many years from now?