Tips for navigating a medical hardship when you’re unable to work

Medical emergencies can put you out of work for a short or long period of time, depending on the severity. Plan ahead and know how to navigate your employer’s benefits for financial peace of mind.

Unexpected medical emergencies can put you out of work for a short – or an extended – period of time. Read on to learn how to navigate these situations, prepare financially and make the most of your employer’s benefit programs.

Hope for the best while you plan for the worst

Nobody likes thinking about the possibility of an unexpected medical emergency – especially if you’re fit and healthy, or young and new to the workforce. The reality, however, is that more than one in four 20-year-olds will become disabled before they reach age 67.

Should something unexpected happen, it’s common for employers to have programs in place to help you through the difficult times. U.S. Bank Wealth Manager Shannon Baustian says these programs can offer meaningful support for people who qualify to receive benefits. Still, she adds, no program is a silver bullet.

“The only way to really cover your bases is to get your personal finances in order before you need the help in the first place,” she says. “Don’t let yourself become dependent on an employer or government program to pull you through if you’re unable to work. The programs aren’t designed to deliver long-term or comprehensive payouts.”

And take note: Every benefits program is different. It can vary on the industry field, size of the organization or even if it’s public or private. So make sure to check into your employer’s benefits program.

What is disability insurance: types and benefits

There are two basic types of disability insurance: short-term coverage and long-term coverage. Both are set to replace a certain part of your monthly base salary during disability, up to a specific dollar amount.

Short-term disability insurance:

• Typically replaces 60 to 70 percent of your base salary
• Lasts anywhere between a few months and one year
• May have a short waiting period (e.g., two weeks) before benefits kick in
  
  

Long-term disability insurance:

• Usually replaces 40 to 60 percent of your base salary
• Ends when the disability ends (if the disability continues, benefits end after a certain number of years or at retirement age)
• Usually has a 90-day waiting period before benefits kick in
  
  

Different policies have different definitions of “disabled,” and pay out only under certain conditions. Your employer’s HR department will help you understand what options you have, and which makes sense for your situation:

• Some policies pay if you can’t work within your chosen occupation (even if you could work a lower-paying job). This type of insurance often gets used by highly skilled people who have invested a lot of money in their training. It’s the most expensive form of disability insurance.
• Others pay if you aren’t physically able to work at all, in any setting.
• Still others cover “partial” disability. That means they still pay a reduced benefit if you are able to work part-time.
   

It is always best to check with your employer about which leave or disability you may be qualified for and potential extended benefits.

Understand what disability insurance benefits can’t do for you

While disability insurance replaces some of your income, it has its limitations:

• It does not cover medical care or long-term care benefits.
• Every state has different rules. In some states, you pay into a government program. In other states, you might only be able to purchase a policy through your employer.
   

While purchasing additional insurance might not be the right move for everyone, it’s an option to consider. Regardless, Baustian emphasizes the importance of personal financial responsibility in planning for the unexpected.

“Long-term care gets calculated based on your age and your health,” she says. “So it’s less costly if you buy it early and when you’re healthy versus down the line when you might have developed health issues. I always recommend purchasing the additional insurance if your employer makes it available.”

So what about Social Security?

There’s a common misperception about Social Security Disability Insurance (SSDI), Baustian notes. Some think SSDI covers you if you’re suddenly unable to work due to injury or illness.

According to the Social Security Act:

• It doesn’t apply to most cases. SSDI only pays benefits to people with “a severe medical condition that will last at least one year or result in death.”
• It’s slow. Benefits can take many months to start arriving.
• It doesn’t pay much. At the beginning of 2019, Social Security paid an average monthly disability benefit of about $1,234 to all disabled workers. For context, that’s barely enough to keep a beneficiary above the 2018 poverty level ($12,140 annually).

Time to buckle down and start planning

As far as Baustian is concerned, taking steps toward your financial freedom is every bit an investment. It’s an investment both directly and indirectly in your overall well-being.

“Financial stress has a big impact on your personal health and relationships,” she explains. “The best strategy is to put yourself in a place where you can make decisions that eliminate that stress – or maybe even prevent it from building up in the first place.”

In practical terms, that process involves tallying how much your lifestyle costs each month. Calculate your fixed expenses (regular bills for housing, utilities, etc.) and your variable costs (groceries, discretionary spending).

“Once you do that upfront planning, you have a better sense of where you stand,” says Baustian. “When to trigger those benefits. How much you’ll need to close the gap between what you were earning and your disability income.”

A common rule of thumb is reserve three to six months of total living expenses, put into savings, and leave it be. But Baustian takes a more conservative approach. “I say get yourself set up for 12 months, minimum. That’s a full year of coverage if you need it. And hopefully you never do.”

Leave no money on the table

While you work toward a year’s worth of wages in your emergency fund, start exploring the benefits your employer offers. Dig into what your employer offers in terms of ancillary benefits and decide which benefits make sense for your own situation.

A great example is backup daycare. This benefit is huge for parents. It can mean the difference between finding daycare within hours and getting back to work or taking an unpaid personal day.

Other examples might include tuition assistance, adoption assistance, surrogacy assistance and Family and Medical Leave.

In the end, there’s money out there, but you might have to ask for it. Employees should be looking at opportunities to make the most of their benefits without a quote.

To learn more about whether your employer’s long-term disability insurance may be enough, get the breakdown here.