You’re enjoying your after-work jog when you slip and fall, injuring your back. What initially was just a clumsy accident, or so you thought, becomes a month—or more—out of work as you wait for the pain to subside and your physical therapy to take effect.
Unlike an on-the-job accident, which is likely to be covered under Worker’s Compensation, it is up to you to prepare for and deal with incidents like these once they happen.
In addition to tapping into your emergency fund, here are three other ways to potentially cope with replacing your lost income when you’re out of work due to a disability.
Many workers think Social Security Disability Insurance (SSDI), or their state’s program, will cover their loss of income if they are unable to work.
Yet SSDI benefits average $1,171 a month. That’s just above the 2017 federal poverty line for an individual. For further context, SSDI replaces less than half of the income of anyone earning over $30,000 a year.
If you are one of the 75 percent of full-time workers in America who earn more than this threshold, you are looking at a severe income loss if you experience a disability and rely on SSDI.
The SSDI application process can take months or even years, making alternate sources of income replacement necessary.
However, many other forms of income replacement—such as PTO or unemployment benefits—disqualify you from SSDI benefits.
Employer Sick Pay and Paid Time Off (PTO)
If you’ve banked sick days and other paid time off (PTO), your employer may either allow or compel you to use them if an illness or injury leaves you unable to work.
Many State Disability programs require a minimum number of days of missing work before kicking in.
Using your PTO will typically make you ineligible for receiving SSDI or State Disability payments until their required amount of missed work days after your PTO runs out.
Your most comprehensive income replacement source is short-term or long-term disability insurance.
Short-Term Disability (STD) pays you a portion of your income for a short period of time after you run out of sick leave. Many employers offer options with differing levels of coverage.
STD insurance is designed to replace your income over a short period of time while you recover from the illness or injury that is preventing you from working. While most claims last three to six months, you may be eligible for coverage under STD for up to one year depending on your plan.
Long-Term Disability (LTD) pays you a portion of your income after you run out of both sick leave and STD coverage.
LTD insurance pays a percentage of your salary up until retirement age—if permanently disabled—or when you are able to work at 80 percent of your prior level. This coverage typically replaces 50 to 60 percent of your salary, depending on the policy.
To ensure you have a plan in place to address the possibility of short or long-term disability, download our disability benefits inventory checklist and talk to your financial advisor.