Most working adults in the United States would not be capable of paying their bills for very long if they became disabled and lost their ability to earn a living. It's important to know what kinds of financial assistance might - repeat, might - kick in if something bad were to happen during your working years.
1. KNOW YOUR COMPANY'S SICK LEAVE POLICY. How much sick leave do you have at full pay? Can you accumulate sick leave over time? Do so if possible, and also find out whether your employer provides short-term disability insurance, which usually lasts 26 weeks.
2. UNDERSTAND HOW WORKERS' COMPENSATION WORKS. The only way you can be eligible is if your disability is caused by an accident on the job. Workers' comp provides medical benefits and cash, typically two-thirds of your average weekly wage.
3. INVESTIGATE SOCIAL SECURITY DISABILITY INSURANCE. To get this coverage, you have to prove that your disability is so serious that you won't be able to work for at least a year, and also show that you've worked long enough and paid enough Social Security taxes. Two-thirds of first-time applicants get denied. (You can appeal the decision.)
4. ASK ABOUT LONG-TERM GROUP DISABILITY COVERAGE. Your employer may or may not provide this coverage. About 40 percent of workers at medium-sized and large firms have group disability coverage, meaning many employees do not.
5. FIND OUT WHAT YOUR GROUP COVERAGE COVERS. If you have it, this insurance typically provides 60 percent of your former income, maxing out at $5,000 a month; some plans limit the benefit to $3,000 a month. You may have to work at the company for several years before qualifying.
6. GET A CLEAR DEFINITION OF "INCOME.' If you'll be getting 60 percent of your former income, clarify whether that income includes overtime, bonuses, commissions or pretax contributions to a 401(k) plan. (Warning: It might not.) Also, brace yourself for a big tax wallop. You'll owe income taxes on any disability coverage bought by your employer.
7. SUPPLEMENT GROUP COVERAGE WITH INDIVIDUAL COVERAGE. If you buy additional coverage on your own, you can take it with you when you change jobs, and it will be tax-free. Comprehensive coverage can be costly, although you can find accident-only disability policies for $25 a month.
8. OR YOU CAN BUY EXTRA GROUP COVERAGE. Group coverage always costs less than individual coverage, so you could buy additional insurance through your employer to save money. The amount you buy would be tax-free, but you wouldn't be able to keep the coverage if you switch jobs.
9. REDUCE YOUR PREMIUMS. If you're paying for individual or extra group coverage and your insurer knows you have a condition such as diabetes or heart disease, you may be able to lower your premiums by documenting any health improvements. Be sure to let your insurer know if you lose weight, quit smoking or commit to a regular exercise routine.
10. BE PREPARED FOR STAGGERED HELP. Even if you qualify for all of the above-mentioned benefits, you can't tap them at the same time to increase the amount of money you have coming in each month. Workers' comp usually activates first, followed by Social Security disability, then group disability.
Sources: Kiplinger's Personal Finance magazine (www.kiplinger.com) Life and Health Insurance Foundation for Education (www.life-line.org) Florida Division of Workers' Compensation (www.fldfs.com/WC/) Social Security Administration (www.ssa.gov/disability/)
