If you are getting ready to transition from the military, there are several things to know about should you become injured or disabled. It is important to understand the difference, as some of these involve you providing payment for insurance that keeps income flowing while you recover. In the military you were treated, received quarters or light duty, and typically never missed a paycheck. This is not necessarily the case in the commercial world.
Injured on the Job?
First, if you get into an accident at work and you must miss work for a while, you may be covered by worker’s compensation. This form of insurance provides wage replacement and medical benefits to employees injured in the course of employment. If you take worker’s compensation, you may lose your right to sue your employer for negligence. In most states, some type of workers’ compensation is compulsory for almost all employers.
Injured Away from Work?
What happens if you get into an accident away from work and become disabled? In this case, if you miss work, you may not receive pay and you probably will not be eligible for workers comp. Fortunately, many companies offer disability insurance for this situation. Disability insurance protects your income if you experience a serious illness or injury. Usually however, it will not help you if you miss a week of work due to the flu.
Disability insurance provides coverage after a predetermined waiting period, AKA elimination period, for conditions that would keep you from working. There are two types of disability insurance, short-term and long-term with each type having unique benefit periods, elimination periods, and benefit amounts. These are distinctly different, and you should understand them before selecting options with your human resource (HR) department during your first week of work. If these benefits are not mentioned during your HR processing, you might should ask about these insurance options.
Short-Term Disability
Short-term disability insurance is voluntary benefit selection that replaces part of your income (usually 40-70%) should you become temporary disability, protecting you from financial hardship. Usually, the insurance policy is paid in full or partially by the employer, as it helps them ensure you can remain financially stable long enough to recover and come back to work.
To qualify you cannot be able to perform normal work duties due to illness or injury for several weeks or months. Pregnancy, surgery rehabilitation, and severe illness are generally types of eligible conditions. Generally, you must provide a medical form signed by a doctor, detailing the illness or injury and the first date. The first date is typically used as the beginning of the policy’s elimination period, which usually ranges 1-14 days. The income is generally taxable, and you can request to have the tax deducted from your benefit check.
Long-Term Disability
Not all companies offer this benefit, and it is often paid by you, not the employer. This type of policy works with short-term disability, providing income for long-term illnesses and injuries. Once your short-term benefits are exhausted, a long-term disability policy would continue to provide some income (usually 60-80% of lost wages), until you can return to work.
Like short-term disability, you would provide medical proof of a qualifying illness or injury lasting beyond the long-term disability elimination period (usually 90 days). Benefits continue until you are medically cleared to return to work, or the policy benefits are exhausted. Most long-term disability plans provide coverage up to 36 months, sometimes longer.
Because the insurance companies may be providing benefits for an extended period with long-term disability, recipients should expect more stringent medical requirements and will have to prove that they are unable to perform nearly any kind of work.
What if My Company does not Offer Disability Insurance?
Your new company may offer short-term and/or long-term disability insurance. However, you may find that there are no disability benefits available through your new company. If you want one or both, and there is no offering, rest assured there are multiple insurance companies offering this type of self-insurance. If you are self-employed, this maybe your only option.
Be aware when a short-term policy is not a benefit option, you may have to wait several months without income before you qualify for long-term benefits. Due to the longer elimination periods, some employees self-insure for a combination of short-term and long-term disability coverage.
Bottom line: if you like to live dangerously or have high-risk hobbies, you will probably want to make sure you take disability insurance.
