Imagine that you are cruising along through a work project, whether its on an assembly line floor, in a cubicle or inside a conference room. All that labor, computer work or other effort catches up with you and, suddenly, you’ve put your back out.
Everything that happens next should be covered, right? Wrong. And with economic conditions remaining stagnant, few Americans can afford to take the right steps to make sure rehabilitation and lost income from this injury are properly accounted for to minimize the physical and financial impact to themselves and their families.
The proof lies in recent statistics involving personal bankruptcy. About 50 percent of bankruptcies stemmed from medical causes, according to a February 2005 article published by Health Affairs entitled “MarketWatch: Illness And Injury As Contributors to Bankruptcy.” Among those whose bankruptcy was caused by a disability, out-of-pocket medical expenses averaged $411,854 once the disability set in. With minimal savings and without their previous earnings, families already dealing with serious disabilities may be financially overwhelmed. And the percentages aren’t encouraging: Workers have a 1-in-5 chance of sustaining a disability during their working years that lasts at least one year.
Workers’ Compensation isn’t exactly a safety net, either. It only covers injuries sustained while on the job. However, there is a precaution working families can take to help protect their homes and lifestyles: purchasing long term disability (LTD) insurance.
This coverage provides money if the insured becomes totally disabled and can’t earn income. The money can be used for groceries, household bills, mortgage or rent payments, among other things. The LTD insurance amount a worker may be eligible for is based on that person’s annual income before their disability occurs, and the coverage can be customized to fit your lifestyle. A personalized coverage amount also keeps the cost of LTD insurance in check, so coverage is affordable.
Obtain your own disability insurance as an individual, instead of through your employer. It’s tax free and can often work as a supplement to whatever your employer may offer — an increasingly rare perk after the economic bubble burst in 2008.
The other reason to buy your own LTD insurance? Harsh federal laws governing employee benefits don’t apply, which can be a boon for the person insured if they get into a tiff with the insurance company over denied claims — a practice within the industry that has seen some very ugly headlines over the past few years.
Lawrence Mann, a Bay Area lawyer specializing in disability law, says that these tiffs involving private LTD insurance plan can often be solved by proving you have a disability. However, under an employer-sponsored plan, which is governed by ERISA (Employee Retirement Income Security Act of 1974), the person insured must also prove the insurance company is abusing its discretion to pay out benefits. Under this law, the opportunity to take the insurance company to a jury trial — in theory, an advantage for the insured person seeking empathy from jurors who may have their own opinion about insurance companies — disappears. And generally, the main evidence is merely the paperwork and correspondence between the insured person and the insurer.
“Employee insureds who lose their homes because the insurance company will not pay their benefits have no remedy (they are out of luck), unlike ordinary insureds who can sue their insurance companies for consequential damages,” Mann says. “There are some legal exceptions to these draconian and oppressive ERISA laws, but not very many.”
Mann suggests consulting with a good lawyer before taking action. “Disability Insurance claims are complex and easily can be lost with a misstep. Any insured contemplating making a disability insurance claim should, before making the claim, consult with an attorney experienced in disability insurance law.”
Helping individuals and small businesses set up the proper long-term disability insurance package is one of the offerings from Palma Financial Services, Inc. The family-owned firm recently helped a dentist acquire a policy that will cover the individual as long as they are disabled, with the option of a lump-sum payment from the insurer, which is tax free.
If you have any questions regarding long term disability insurance please call us at Palma Financial Services for a free initial consultation.