Disability insurance pays you a partial amount of your regular wages if you become disabled and are unable to work. Monthly benefits usually last for a specific number of years or until you turn age 65. As a rule, benefits stop once you reach your retirement age under Social Security. The presumption is you no longer depend on the income you earn from employment.
Disability Among Older Americans
Survey data compiled by CODI shows that the probability of disability increases with age. Statistics show that the incidence of disability is 44.6 percent among individuals 65 to 74 years old. The frequency of disability climbs higher after age 75. The chance that a disability will be severe increases with age as well. Severe disability occurs in 56.8 percent of people ages 65 to 74. According to the Agency for Healthcare Research and Quality, in 2002 individuals age 65 and older accounted for about 13 percent of the American population. This same age group was responsible for using 36 percent of the nation's total health care expenses. About 33 percent of all people with a disability are age 65 and over. Of those, 43 percent suffer a severe disability.
Premiums Increasing With Age
Disability insurance costs more as you get older. Since insurance companies base premiums on a person's age, occupation and gender, you will pay less in premiums if you apply for disability insurance when you are younger. Women pay more for the same amount of coverage men have because the chance of disabilities increases with age and women live longer. Other factors that can affect the cost of coverage include the status of your health and the amount of coverage you want.
If you can afford it, purchase disability insurance for a benefit period longer than five years. The premiums will be higher, but selecting the lifetime benefit period offers the most protection, especially if your disability lasts for many years or is permanent. By opting for the lifetime benefit period, you can receive benefits for as long as you are disabled. The policy will pay you benefits even after you reach retirement age as long as you became disabled before you turned 60. If an insurance company doesn't offer this option or the coverage is too expensive, buy a policy that will pay you benefits at least until you reach age 65 or your legal retirement age. The status of a disabled worker who is paid benefits through an employer's disability plan usually changes to that of normal retirement after reaching retirement age.
Amount of Benefit
Disability insurance partially covers lost wages when injury or illness prevents you from working. When you are retired, you no longer need this same financial protection. If you must rely on disability insurance at some time before you retire, plans vary in what percentage of your income a policy will pay out in benefits. No plan will pay 100 percent of your usual salary. Most policies pay between 60 and 70 percent of your wages but may include certain restrictions and exclusions. Options available to disabled elderly include Supplemental Security Income for individuals who are 65 and older and live on a limited income. Meeting the eligibility requirements for SSI may qualify you for additional federal and state assistance programs. Individuals who receive Social Security disability benefits prior to the age of retirement automatically begin receiving retirement benefits once they reach full retirement age.
- CODI: Age, Sex and Disability
- Agency for Healthcare Research and Quality; The High Concentration of U.S. Healthcare Expenditures; June 2006
- Smart Money; Do You Need Disability Insurance; Bradford; September 2008
- Social Security Online; What You Need to Know When You Get Social Security Disability Benefits; June 2010