In the event of a disabling injury or illness, your health and wellbeing is of utmost importance and you can rest at ease knowing that your medical policy will cover all associated expenses. But what many individuals overlook is the ability to insure one’s income with a disability policy.
The State of California requires all employees pay into its short-term disability program through payroll deductions; however, long term disabilities in excess of one year will have to processed through the federal Social Security program where 85% of applicants are rejected.
Short Term Disability
Group Benefits are coordinated with California’s SDI program. SDI will pay between 60-70% of an employee’s base earnings to a maximum of $1,216 per week for 2018. This equates to a base threshold of about $105,000. Any employee’s earning more than $105k annually will need a separate short term policy in order to receive an additional 6.6% to a max benefit of 66.6% short-term. If an employee has a $200k salary, 66% would equate to $2,538 per week; more than double what the state provides and in all likeliness will be necessary for maintaining their quality of living.
Due to the coordination of benefits with the state program, group short-term policies for individuals residing in CA are fairly inexpensive. STD policies will dovetail into a long-term disability policy that typically commence at 90 or 180 days depending on the policy.
Long Term Disability
Statistics show that one out of four individuals that are currently in their 20’s will experience a long term disability before the age of retirement. The average long term disability lasts for 34.2 months before the individual is able to return to work. That is a staggering statistic to think that there is a 25% chance you will not be working for at least 3 consecutive years due to an illness or injury.
LTD contracts will have seamless coverage once the STD policy ends and can pay a monthly benefit up to 66.6% of one’s salary through a maximum benefit period through Social Security Normal Retirement Age as defined by the policy.
With healthcare premiums continuously increasing year over year, many employers are searching for options to help reduce their benefit costs.