What would happen to you financially if you were injured or got sick and were unable to work? Your answer might be, “Well, there’s a government disability program. I’m not really sure what it’s called, but I know it’s there as a backup if I need it.”
Are you sure?
First, let’s cross Workers’ Compensation off the list. This government program covers you only if you get hurt or sick as a result of your job. According to the National Safety Council, 90% of disabilities occur outside the workplace, so chances are you won’t be covered by Workers’ Comp.
Then consider the Social Security Disability Insurance program, which pays disability benefits independent of where the disability occurs.
“Great!” you say. “That’s what I’ll rely on.”
Not so fast.
Did you know that the Social Security Disability Insurance program is on the verge of going bust? As reported in this insurancenewsnet article, “Laid-off workers and aging baby boomers are flooding Social Security’s disability program with benefit claims, pushing the financially strapped system toward the brink of insolvency.” According to congressional estimates, money in the program is due to run out in six years.
The article goes on to underline a second reason you should not rely on this program: “The stampede for benefits is adding to a growing backlog of applicants—many wait two years or more before their cases are resolved.” (You can read more about this from my post during Disability Insurance Awareness Month this past May.)
Now, a third reason to reconsider relying on the government. The federal government defines a disability very narrowly as “the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or has lasted or can be expected to last for a continuous period of not less than 12 months.” There are no benefits for short-term disability or partial disability.
And lastly, if you were to qualify, the average benefit hovers around $1,000. This would give you an annual “salary” that’s below the poverty line.
This should make you rethink your strategy to protect your paycheck in the case of a disability. Just ask yourself this: How long could I go without a paycheck before experiencing financial problems? Then take the next step to learn more about disability insurance.