If your employer offers private disability insurance, you may be thinking about taking a pass. Whether this decision is based on myth, fact, or finances, it's best to make sure you know what you're passing up. Here are six common misconceptions about private disability insurance and why having this extra coverage is a good idea.
#1. You won't ever need it.
No one wants to believe anything bad will ever happen to them, and thinking along these lines is a form of denial that can cost you down the road.
From a "numbers" standpoint, there's a good chance you won't need disability, but there's still a chance that you will. According to statistics offered by the Social Security Administration, about one out of four people in their 20's will become disabled before reaching retirement age. This means that the average person entering the workforce today has about a 25% chance of becoming disabled. This number could fluctuate from year to year, but that's still a relatively convincing number for most people.
#2. You're too young to worry about it.
Unfortunately, disability doesn't solely afflict the elderly or even the middle-aged. By the end of 2012, more than 2.5 million workers under the age of 50 were receiving SSDI benefits. Another staggering statistic? More than half of the 37 million workers who are classified as disabled are between the ages of 18 and 64—a majority of them well under retirement age.
While it's easy to think the young are invincible, it stands to reason that no matter your age, it's best to prepare for the unexpected events in life.
#3. Worker's compensation will take care of you.
Worker's comp is a great benefit offered by the US Department of Labor, protecting those injured on the job or performing their work. But the truth is, most disability claims arise from illnesses or injuries that don't happen at work at all.
What would you do if your illness or injury had nothing to do with your job, and you couldn't work? You'd need income whether temporary or permanent. And that's where private disability insurance comes into play.
#4. Government disability will take care of you.
Depending on your situation, you might be able to receive SSDI benefits should you become disabled. But certain criteria must be met.
Your disability must be total and so severe that you can't be expected to work for at least a year. Also, how much you can receive depends on how many credits you've earned. And lastly, if you do get approved, you must be disabled for at least five months before you can begin to collect.
What if your disability is only temporary or you haven't earned substantial credits? This is where private insurance coverage can help. You can get plans that pay out more than what you'd get with SSDI and without having to wait the five months. You can also get coverage for any type of disability, whether short or long term. And in most cases, you don't have to prove you can't work at all. In other words, you can often collect and continue to work part-time.
It's also not a "one or the other" situation. Some workers receive SSDI benefits and payments from their private insurance at the same time.
#5. The company probably won't pay you anyway.
If you're worried you'll spend years paying into the policy, only to be denied when the time comes, you can generally put those worries to rest. While there are some disabilities that may be a little more challenging to prove, it typically comes down to providing the right evidence.
For instance, if you've been diagnosed with a mental health problem like depression or bipolar disorder, you'll need to submit medical records and documentation of all treatments received.
If you're making the decision to turn down private disability insurance due to negative reviews, remember that those people represent a small portion of claimants, and people who are satisfied with insurance providers rarely leave glowing reviews. The troubled "wheel" often squeaks the loudest.
#6. Companies constantly increase their rates.
If you're worried about your premiums increasing over time, there's a simple solution. Get a non-cancellable policy, and your rates won't go up. Even if the policy you get doesn't offer this as a free add-on, it's highly unlikely that your carrier will increase their rates at all over the life of the policy, making it a completely worthwhile investment.