A majority of people go to work so that they can provide for themselves and their families. Unexpected illnesses or injuries, therefore, will prevent one from working and compromise his or her ability to provide for his or her loved ones. In fact, when an unfortunate incident happens, most people’s first worry is how they will manage to pay their bills without an income.
Luckily, most people get disability insurance as part of their benefits at work. Unfortunately, many of such policies will only cover a small percentage of the affected person’s salary. Most of the policies only cover between 40 and 60 percent of the salary. You might think this is a lot, but you will end up taking home an amount that cannot cover your bills when it is taxed. And that’s where supplemental disability insurance comes in.
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What is supplemental disability insurance?
Simply put, supplemental disability insurance is a policy that is meant to cover the existing gap between your previous income and what you will get from your existing long-term disability policy.
When you get ill or injured, you cannot carry out your duties at work as you did before. As a result, your salary will be cut by a particular percentage. In most cases, your current disability policy will not cover the difference in your income. That’s when you need the supplemental coverage.
Supplementary disability insurance will help you maintain your current lifestyle even when you cannot work because of an illness or injury.
Do you need supplemental disability insurance?
Accidents occur, and they can happen to anybody at any time. So, you need to get supplemental disability insurance to act as a safety net for when you fall ill or get injured. Additionally, you might need supplemental disability insurance if your current disability policy cannot close the gap in your income in case of an illness or injury.
In many instances, your disability policy won’t fill the gap. Why is that? Most disability insurance policies have stringent limits that cover 40 to 60 percent of your income. Some employees are limited to payouts ranging from $3000 – $5000 each month. So, if your salary range is higher than that, it means that your current disability policy won’t maintain your existing lifestyle.
You should also get supplemental disability insurance if your disability benefit period is too short. What does this imply? A disability policy covering you for 10 years will cost more than one that covers you for 2 – 5 years. If the policy from your work benefits covers less than 5 years, you will be better off with supplemental disability insurance coverage that offers a period longer than that. The supplemental cover will come in handy if your illness or injury extends the past 5 years.
In some cases, an employee qualifies for Social Security Disability Insurance (SSDI). However, most of these claims are denied. Even when your claim is approved, the payout will cut into your employer’s disability insurance. Keep in mind that your benefits could also be taxed already. Once you purchase a supplemental disability policy, the benefit amount will not be impacted if you are also eligible for SSDI.
Changing jobs will also have you lose your disability insurance. Supplemental disability insurance, however, sticks with you. You don’t have to go through the entire application process again after settling in your new workplace.
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Advantages of supplemental disability insurance
Here are other benefits that you could get from buying supplemental disability insurance.
- Higher coverage limits: One of the most notable advantages of supplemental disability insurance is the higher coverage limits. This policy lets you receive an amount close to your former income before your injury or illness. Usually, supplemental disability policies pay approximately 80 percent of your previous income.
- You get complete income coverage: Normally, standard disability policies account for base salaries and or hourly rates when calculating your monthly coverage benefits. However, supplemental disability insurance also factors in other income sources such as your commissions or bonuses. That means that your payout will most likely be closer to what you used to earn before the injuries.
- Ideal for former high-income earners: If you used to make about $150,000 per annum or $15,000 per month, then a payout of $5,000 would not sustain your lifestyle. But if you buy supplemental disability insurance, there’s a high likelihood that you’ll still maintain your current lifestyle after an illness or injury.
Short-term vs. long-term supplemental disability insurance
Short-term and long-term supplemental disability insurance have some differences. The differences mainly stem from the benefit period.
Short-term disability policy offers you maximum coverage of 2 years, although most people buy one for a period not exceeding 6 months. On the other hand, the long-term disability insurance coverage period ranges from a few years to your entire life. You, however, must keep in mind that both policies have different premiums and limits.
If you take a short-term policy, but it ends before your recovery, you can change to a long-term disability policy. Some people, however, do not get access to long-term disability insurance. Fortunately, supplemental disability insurance allows you to combine both policies.
How do you find good supplemental disability insurance?
To get the best supplemental disability insurance, you need first to assess your needs. Next, you need to find a trusted expert who will guide you through all the application steps. I prefer to work with an insurance agent who can get you the best policy and price. Having an expert is recommended because it will ensure you don’t miss any crucial details, especially on the fine print.