Author Topic: relying on Social Security for disability, Life insurance, and Medical insurance  (Read 4927 times)

Mt Tahoe

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So I just received one of the social security statements. It states benefits you get if you die, what your children would get, disability payments, etc...

I know most people get additional insurance to supplement this. I guess I did not realize that SS would pay your if you were disabled. I have carried my own disability insurance for a while now and it is not cheap. As we are considering adopting 2 or more children, we are being pushed to purchase life insurance.

My questions is how many of you simply rely on Social Security for life and disability insurance, and later in life, medical insurance (medicare)?

nereo

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My questions is how many of you simply rely on Social Security for life and disability insurance, and later in life, medical insurance (medicare)?

You've got a bunch of interwoven questions here, which I suspect is why you haven't gotten many responses yet.
You are asking about
1) life insurance
2) disability insurance
3) medicare/medicaid

Here's my personal breakdown
Yes, I recently purchased term life insurance.  IMO term life insurance is all a mustachian should ever be looking into, since you should be FI in a relatively short time frame (10-20 years) and debt free much earlier than that.  Once you are FI there's no need to have life insurance, since your portfolio would continue to support your dependents after an untimely demise.  Also, if you don't have young children and your spouse works, you don't need a life insurance policy that is larger than debt + a year or two of oyur income. 

2) life insurance actually does pay out for permanent disabilities too. I've got a long list of exactly how much I will get financially if I loose everything from my little toe (a few $K) to the loss of both my eyes (almost my entire amount).  I do not have supplimental disability insurance.  If you are injured on the job, your workplace compensation plan will pay you some benefits (although in many states you won't the full amount of your injuries).

3) medicare/medicaid is a huge topic.  There are forums dedicated just to this elsewhere on the net, but my short answer is that you should never rely solely on medicare/medicaid for your health insurance - for starters it is too politicized and every election cycle there are plans to change it (and it gets changed significantly fairly often).  Also, it's designed to provide a fairly minimal amount of care.    Finally, everyone's health is different - you need to consider what care you will likely need now and later in life, which is dependent on your body, the activities you do and your family history.  Check out your health marketplace to see what kind of plans are available for you, and what subsidies you qualify for (www.healthcare.gov - NOT the same as www.healthcare.com)

rubybeth

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I guess I did not realize that SS would pay your if you were disabled.

That's because they likely wont. It majorly depends what you mean by 'disabled.' Your personal disability policy likely covers things that SSDI (social security disability insurance) may not. It's very difficult to obtain SSDI benefits, so I would not rely on this. Best insurance against becoming disabled? Become financially independent and don't rely on working for your income. Next best? Take an insurance policy via your employer that covers short or long term disability (note: short term will be more expensive than long term because you are much more likely to become disabled temporarily--imagine a broken leg or arm--than you are to become permanently disabled... it's these permanent disabilities that SSDI would perhaps cover.

We carry term life insurance as a protection against loss of income if one of us were to die while we are still in our working years (no kids). It's relatively cheap and offers peace of mind, and we'll likely drop it when the term is up because we'll most likely be retired by then.

Mt Tahoe

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Thanks Nereo. Very helpful. Lets leave out the medicaid issue because i agree, it is a huge subject and I know nothing about.

On Life insurance, I was not aware of the additional clauses (or riders?) that covered disability. I though Life was only for death, period. I will need to do some more research. and yes, at 40something, I was only looking to get life insurance for 20 some years, or until kids will be old enough to work. We have no debt except for home mortgages.

I guess I am interested in finding out more about the disability and life benefits through Social Security. It is nice to know that it is some money that would come in to help.  Obviously if you have huge dept or a lavish lifestyle, it would be difficult to survive on SS.

The Wash post had an article about disability and the length of time it takes to get paid (some people die before they get a penny). Just interested in knowing what people's experience were with SS. http://www.washingtonpost.com/sf/national/2014/10/18/the-biggest-backlog-in-the-federal-government/

Cassie

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SSDI was meant to be a last resort if you can't do any kind of work. It is very difficult to get ( can take up to 2 years) and most people are denied. I worked with clients for years in this type of situation.  If they ever get it most people have already lost their homes etc due to it taking so long.  I would buy the disability insurance but makes sure it says it will pay if you can't do your job. If it says any job it is worthless.

rubybeth

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I guess I am interested in finding out more about the disability and life benefits through Social Security. It is nice to know that it is some money that would come in to help.  Obviously if you have huge dept or a lavish lifestyle, it would be difficult to survive on SS.

The Wash post had an article about disability and the length of time it takes to get paid (some people die before they get a penny). Just interested in knowing what people's experience were with SS. http://www.washingtonpost.com/sf/national/2014/10/18/the-biggest-backlog-in-the-federal-government/

I guess I'd say call a social security administration office and ask. SSDI is crazy difficult to get; as Cassie wrote, many people get denied and this only prevents people from abject poverty, it's certainly no way to reach FIRE. My father represents people applying for SSDI benefits and goes to social security court when required, and it's just a nightmare. I'm glad there are people like my father to help people navigate this system, but you have to pretty seriously permanently disabled to qualify, and the benefits aren't that great. I'll have to read that Washington Post article later.


VirginiaBob

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I was very surprised how high the survivor benefit would be for my wife and kids if I were to die.  I was considering not even getting life insurance because of this, but eventually I did opt for a modest term policy.

GizmoTX

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Anyone who manages to qualify for SSI disability (Supplemental Security Income) is eligible for the same base amount, $721. But the actual monthly SSI payment will depend on whether you or your family have any countable income, whether you are married, and what state you live in. Other sources of income reduce SSI.

LT disability insurance benefits are taxable if the premiums were paid with pre-tax earnings, & non-taxable if paid with an after-tax deduction. Which to choose depends on your probability of ever needing the benefit.

Generally, LT disability & term life insurance are a good idea if you have dependents & are the sole earner & are not FI.

Cassie

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There is SSI for poor people that can no longer work and do not qualify for SSDI.  SSDI is for people that have 40 quarters of work ( 10 years) & it is based on your overall earnings.   The more you earned the more you make with a cap of course. Our poorer clients that received only SSI would often only get between 300-500 per month.  I retired from that type of work 3 years ago so I am sure the amounts have changed. 

NestEggChick (formerly PFgal)

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I have a lot of experience with this, so let me speak as someone who's gone through it. This is a bit long, but it's a real account. And I have suggestions for you at the end.

Private disability insurance is no guarantee. I have a legitimate disability. I have letters from many doctors. The insurance company denied my claim. I had to pay a lawyer a pretty large amount to prepare and file an appeal. Finally the company approved my claim on appeal. That took more than a year. In the meantime, I had to live off my savings, and pay the lawyer from my savings. When I was approved, I got a back payment. As someone else pointed out, the criteria was proof I could not do *my* job. After 2 years from my date of eligibility (just a few months after my claim was finally approved) the standard became proof that I could not do *any* job, even some mythical job with flexible hours that I could do from home. At that point they denied me again. When they did pay me, I received 60% of my salary. It was untaxed.

Social security, meanwhile, also denied me. I appealed. They denied me again. I had a hearing before a judge. Again, with the lawyer. I won. This took more than two years from the time I first applied. Again, I lived off of savings. Again, they gave me a back payment. 25% of that back payment went to the lawyer. That's a federally set rate. Now I receive a payment that is well above the national average. It is $50 less than my rent. My rent is below average for a low-end 1 bedroom apartment in a safe neighborhood in the Boston area.

SSDI pays a lot less than the private insurance did.

If I had not had savings and a supportive family, I would have been homeless. Plain and simple. I also did not have health insurance during much of this process, since my employer's health insurance was tied to the disability insurance. Once I got SSDI I received Medicare. That kicks in 2 years after SSDI eligibility. It isn't fantastic, but it's something. Luckily, I also managed to get Medicaid. Between the two, most of what I need is covered.

Those years of fighting have been pure hell. I had to put off medical treatments due to lack of money and health insurance. My main doctor told me that my health simply could not improve while I was under so much stress. The entire situation was only settled a few months ago. Now I must figure out how to survive financially when there is no possible way that SSDI can cover all of my expenses. My health expenses alone are over 30% of my SSDI income. I am 35. I am not complaining. I am simply explaining the reality. I still hope to improve my health enough to work part time (you can do that with SSDI, up to a small amount) but I'm not there yet.

And I'm one of the lucky ones. I know people with legitimate illnesses who did not get SSDI because they were denied or because they hadn't worked enough before their disability in order to be eligible. I'm also lucky because I had savings. And because I had the resources to hire a lawyer. And because I am intelligent and able to do my own research. And because I used to organize files for a living and was able to keep the paperwork straight and manage deadlines and keep on top of the lawyer when she wasn't communicative. And because I have the physical and mental ability to obtain my own medical records from all of my doctors (not easy!) and save myself the lawyer's $350/hour for doing that. And because I had the support of family and friends. And so many other reasons. Not everyone is this lucky.

What I suggest for you:
1) Your best plan is to have financial independence so that you don't need private insurance or SSDI at all.
2) Keep the private insurance if the cost is a reasonable ratio to your salary. Find out exactly what would be covered. What types of disability? What documentation would you need? How much would you be paid? And how long would the policy pay out for? (5 years? 7 years? 10 years?)
2a) If your payments are really high, how much are they delaying your ability to reach financial independence? Would it be worthwhile to focus on that instead? Provide numbers if you'd like some feedback.
3) Use SSDI as a last resort. It's better than nothing, but it's not great.
4) Maintain your health the best that you can, but recognize that a lot is out of your control (genetics, accidents, etc.) and don't let worry stop you from living your life.

Good luck OP!

Christiana

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Remarriage is another option if one of us dies.  My husband really, really should not attempt to raise our children alone.   

epipenguin

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I do "rely" on social security for my disability insurance. Or, in other words, I don't have any. When I cut my hours down at my day job enough to no longer qualify for benefits, this was something I looked into. I found that disability insurance was very expensive, and there seemed to be so many loopholes and clauses where the insurance company could get away with not paying you, that I decided to risk going without. The cost of disability insurance for me was about the same as health insurance, so I decided it was going to have to be one or the other but not both, and I went for health insurance only. I did make sure to get health insurance with an HSA and am saving extra in that, so I hope after a few years to have built up a good nest egg in there for any health-related expenses.

I have:
1) Enough in savings and equity in my house (I could move somewhere cheaper) to last several years. This would pay for a time period when I was trying to get SSDI but not yet approved.
2) Enough in a 401k that I could squeak by with a small 72T withdrawal until I could get Social Security. OR if I could manage to get enough money in the door so as not to tap my 401k until regular retirement age, it should be enough to fund a decent retirement without any further contributions.
3) The mindset that if I was able to do ANY job, I would do it.
4) The realization that if I were to become disabled, I'm basically screwed and looking at a very reduced standard of living.

I think if I didn't have as much saved as I do, I'd be more worried about the lack of disability insurance. I don't have life insurance as I don't have any dependents.