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Posts Tagged ‘disability policy’

It is sooo easy to play…and fun! …NOT!

Feeling lucky?

Feeling lucky?

First, become disabled as a result of sickness or injury.

The disability may be on the job or off, but must prevent you from being able to perform any substantially gainful ($33 dollars a day or more is considered gainful in 2009) employment. Your medical condition must significantly limit your ability to do basic work activities—such as walking, sitting and remembering—for at least one year. If it is determined that, due to your condition, you can no longer do work that you did before and Social Security determines that you cannot adjust to other work, including work that is not available in your locale, and your disability has lasted or is expected to last for at least one year or to result in death (although dying before being approved in most cases will disqualify you) then you may qualify for benefits.

Second, set an appointment with your local Social Security office to submit an application. The interview process, will take at least an hour. However, you may wait several hours to see a case manager, since in many locations they will not set appointments ahead of time. You will need to have a list of all doctors, clinics, etc. who have seen you. The SSA will request employment documentation for the last 10 years including the specific tasks you performed for each employer. If there are no delays requesting your medical records, or interviewing doctors or verifying employment information, or other required information, and if the local office does not require you to see another doctor, then your application may be processed within 3 to 5 months.

Once your application is considered complete and processed you will receive a notice of approval or denial (3 out of 4 applicants). If denied you may request a reconsideration at which time the process begins again but with a different reviewer assigned to your case. If denied again you may request to be heard by a Social Security Administrative law judge. Sixty-six percent of these cases are approved, but getting there is the long stretch. See Benefits Backlog Swells As Social Security Slims.

If you are fortunate enough to make it this far and get approved you are one of the few living recipients of the Social Security Disability Lottery. Actually to be more exact few in 2006 was over 6,630,000. Although I’m not sure if that number includes those who passed away before receiving their benefits. See He Died Before Disability Came.

That’s not to say the people at the Social Security Administration don’t work hard or that I or anyone else could do a better job than those in D.C., but just… maybe …we might want take our lunch to work one or two days a week and put a few dollars back for the 1 in 8 chance that we might become disabled before age 65.

If you never use the insurance consider yourself lucky! …and if you do use it, consider yourself lucky you had it!

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There are numerous areas that a financial plan needs to cover to provide financial security for you and your family. A few of the major areas are:

  • Emergency funds
  • Life insurance
  • Health insurance
  • Disability income insurance
  • Saving for retirement, etc.

There are two rules of thought regarding financial planning and how much insurance and what type of insurance you should purchase:

1. “decide which goals will take priority and work toward the lesser goals only after the really important ones are well provided for“, and

2. Spread your funds to provide at least some protection to each of the major areas of need, or expressed another way “don’t put all your eggs in one basket”.

I was surprised to read the first opinion expressed by a CNN Money Advisor as if it was the one and only answer to the financial security conundrum. I believe the answer depends largely on you and your situation, and in fact for the most part I subscribe to the second rule of thought. Here’s why:

It is rare that someone just beginning the process of financial planning is able to immediately meet even one of their major goals right away, such as having an emergency fund to meet six months of family expenses or purchasing the maximum amount of life insurance truly needed. But, if one is able to, let’s say, purchase a sufficient amount of life insurance, or purchase an adequate disability policy, but cannot do both, then Murphy’s law is bound to apply; in the case that you purchased the life insurance, you will become disabled, and in the case that you purchased the disability policy, a meteor will fall from the sky landing on you, and only you.

On the other hand, if you are employed with a company that offers a wide array of benefits, it may be worthwhile to sign up for the lowest amount of disability insurance and life insurance, even if it means you cannot put as much into a retirement plan. Remember, regardless of your health or employment situation you can put away into a retirement plan. It does not require you to qualify. However, if any factor such as your health, age, or employment changes, you may not be able to purchase life or disability insurance no matter how much money you have in your emergency fund or in your retirement plan.

This is not meant to question the wisdom of contributing as much as possible to a retirement plan (something you definitely want to do), especially when your employer is matching the contribution amount, but it just illustrates why I believe you shouldn’t necessarily feel that you need to complete one goal before starting another.

Again, I believe that each situation is different and that it is the job of the advisor to inform and explain to the client about the options available and the benefits and drawbacks of each, while it is the client’s job to decide which option best fits his/her circumstance.

Anyway, as always, we are interested in your comments. Do you agree? Disagree? Or is there something else on your mind?

Let us know. We are listening.

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