If you are about to leave the military, there are several things to know if you become injured or disabled. It’s important to understand the difference because some of them involve you providing payment for insurance that maintains income while you recover. In the military, you were groomed, given quarters or light duties, and generally never missed a paycheck. This is not necessarily the case in the commercial world.
Injured at work?
First of all, if you have an accident at work and you have to be away from work for a certain period of time, you may be covered by the compensation. This form of insurance provides wage replacement and medical benefits to employees injured during employment. If you are on workers’ compensation, you may lose your right to sue your employer for negligence. In most states, some type of workers’ compensation is mandatory for almost all employers.
Injured outside of work?
What happens if you have an accident outside of work and become disabled? In this case, if you take time off work, you may not receive wages and you may not qualify for workers’ compensation. Fortunately, many companies offer disability insurance for this situation. Disability insurance protects your income in the event of serious illness or injury. However, this usually won’t help if you miss a week of work due to the flu.
Disability insurance provides coverage after a predetermined waiting period, AKA a waiting period, for conditions that would prevent you from working. There are two types of disability insurance, short-term and long-term, with each type having unique benefit periods, elimination periods and benefit amounts. These are markedly different and you should understand them before selecting options with your Human Resources (HR) department during your first week on the job. If these benefits are not mentioned during your HR treatment, you may want to inquire about these insurance options.
Short-term disability insurance is a voluntary selection of benefits that replaces a portion of your income (usually 40-70%) in the event of temporary disability, protecting you from financial hardship. Usually, the insurance policy is paid for in whole or in part by the employer, as it helps ensure that you can remain financially stable long enough to recover and return to work.
To qualify, you may not be able to perform normal work duties due to illness or injury for several weeks or months. Pregnancy, surgical rehabilitation, and serious illnesses are generally types of eligible conditions. Generally, you must provide a medical form signed by a doctor, detailing the illness or injury and the first date. The first date is usually used as the start of the policy’s waiting period, which usually ranges from 1 to 14 days. The income is generally taxable and you can have the tax deducted from your benefit check.
Not all companies offer this benefit, and it is often paid for by you, not the employer. This type of policy works with short-term disability, providing income for long-term illnesses and injuries. After your short-term benefits run out, a long-term disability insurance policy would continue to provide income (usually 60-80% of lost wages), until you can return to work.
As with short-term disability, you must provide medical proof of a qualifying illness or injury that lasts beyond the long-term disability qualifying period (usually 90 days). Benefits continue until you are medically cleared to return to work or policy benefits run out. Most long-term disability plans provide coverage for up to 36 months, sometimes longer.
Since insurance companies may provide benefits for an extended period of time in the event of long-term disability, beneficiaries should expect more stringent medical requirements and will need to prove that they are unable to perform nearly n any type of work.
What if my company does not offer disability insurance?
Your new business may offer short-term and/or long-term disability insurance. However, you may find that no disability benefits are available at your new company. If you want one or both, and there is no offer, rest assured that several insurance companies offer this type of self-insurance. If you are self-employed, this may be your only option.
Be aware that when a short-term policy is not a benefit option, you may have to wait several months without income before you qualify for long-term benefits. Due to longer elimination periods, some employees self-insure for a combination of short-term and long-term disability coverage.
Bottom line: If you like to live dangerously or have high-risk hobbies, you’ll probably want to make sure you get disability insurance.