Coping with Major Illness

Long-term care insurance policies pay a set dollar amount per day for covered care during the benefit period stated in the policy. Most long-term care policies are indemnity-type policies, meaning they will pay you for actual charges by the care provider (up to the policy’s limits). Other long-term care policies, instead of being based on indemnity, pay daily benefit amounts to the insured rather than paying for actual charges. The latter type of policy offers insurers greater flexibility (e.g., allowing them to pay for home care) and less paperwork. You also need to keep in mind that it’s necessary to plan ahead and sign up for long-term care insurance before you need it because the older the individual covered, the higher the premium is.

When are Benefits Paid?

To receive benefits, you must usually suffer serious cognitive impairment or be unable to perform several “activities of daily living” independently. Long-term care insurance covers activities of daily living (ADLs) without assistance, such as eating, bathing, dressing, continence, toileting (moving on and off the toilet), and transferring (moving in and out of bed).

Period of Payment

The benefit period you choose can range from one year to life; the longer the period, the higher the premium will be.

About 10 percent of the people who enter a nursing home will stay there five years or more. Purchase at least three to five years of coverage, the average length of a nursing home stay.

Types of Care Covered

Most policies cover skilled care, intermediate care, and custodial care at a nursing facility. Home care may also be covered or offered as an extra. You may also be able to purchase coverage for adult day care, assisted living facilities or hospices. Most, but not all, long-term care policies can help cover costs incurred during a nursing home stay, assisted living residence, in-home care, informal care, custodial care, Alzheimer’s facilities, and respite and hospice care.

Elimination Period

This period constitutes the number of days the insured must wait after becoming eligible for benefits before coverage actually begins. The elimination period generally ranges from zero to 90 days, but can go up to one year; the longer the elimination period, the lower the premium is. During the waiting period, you must pay all of the expenses related to your care.

Renewability

Most policies are guaranteed to be renewable. However, rates are generally not guaranteed and can be raised for a class of policyholders with the approval of the state insurance commission.

Rising Health Care Costs

A fixed-benefit policy will lose much of its protective ability over a 10 to 20 year period. Thus, if you purchase a policy at age 60 and expect to rely on it for 20 years, you need inflation protection. This is available with most policies in the form of “benefit increase options” of various types. Benefit Increase Options are also known as automatic benefit increase option, automatic increase benefit, and cost of living adjustment benefit. They provide for annual increases in the benefit amount to offset the effects of inflation and are paid for at the time the policy is issued.

Here are the reasons most often given by insured for purchasing LTCI:

• To avoid being a burden to their families
• To conserve assets for heirs
• To be able to get into the nursing home of their choice
• To be cared for at home as long as possible
• To preserve quality of life
• To have peace of mind

LTCI may not be the best way to achieve these goals. There are alternatives to obtaining LTCI that are more suitable for certain people.

Long-term care insurance is both complex and controversial. Today, experts are suggesting that long-term care insurance may not be right for everyone, for instance, people whose net worth is at least $400,000 (excluding their home) might want to skip LTCI. The choice is yours, however, so here is a summary of some of the main points for and against purchasing such coverage.

Reasons for Buying LTCI

• LTCI, although expensive, may provide protection against costly care. Thus, if other options are not viable, LTCI may be the way to meet your goals. Although LTCI policies remain a low-value product, they are better than nothing.
• If you have family caregivers, the extra home care coverage in LTCI might make it possible to remain at home longer.
• LTCI premium costs increase with age. Once you develop a serious medical condition, you probably will not qualify for coverage. Thus, it is better to buy LTCI early, if at all.

Reasons against Buying LTCI

• You cannot afford the premiums or don’t have enough assets to protect. The National Association of Insurance Commissioners recommends spending only 5 percent of your income on an LTCI policy.
• LTCI policies lack sufficient home care coverage to keep an individual out of a nursing home unless family members or informal caregivers are available to help in providing care. Thus, if your goal is to avoid nursing homes at all costs, LTCI may not be the best way to go.
• LTCI policies return from 60 percent to 65 percent of total premiums paid in benefits. This return rate is much less than returns from other types of health insurance.
• Those with assets over $2 million are better off going the self-insured route or simply paying costs as they come up.

Refuse to pay more than one month’s premium when you apply for coverage. In most states, after you buy a policy, you have 30 days to change your mind and get a refund.

Here are some options for paying for long-term care, along with their advantages and drawbacks:

Transferring Assets

Giving away assets to qualify for Medicaid may make sense for some people who want to leave their heirs an inheritance. The downside of giving away assets is that there is less flexibility and fewer resources to pay for care.

The Medicaid program provides coverage for long-term care services for individuals who are unable to afford it. In the past, some people gave away their assets to qualify for Medicaid and make sure their heirs received an inheritance; however, the passage of the Deficit Reduction Act of 2005 introduced new rules that discourage the improper transfer of assets to gain Medicaid eligibility and receive long-term care services.

As such, for anyone who transferred assets in order to become eligible for Medicaid, there is a period of ineligibility depending on the date of transfer. For individuals transferring assets before February 8, 2006, state Medicaid officials only look at transfers made within the 36 months prior to the Medicaid application (60 months if the transfer was made to or from certain kinds of trusts). For anyone who transferred assets after February 8, 2006, date, the period is 60 months.

In addition, assets transferred, sold, or gifted for less than they are worth by individuals in long-term care facilities or receiving home and community-based waiver services, by their spouses, or by someone else acting on their behalf are prohibited for purposes of establishing Medicaid eligibility. This is referred to as transfers of assets for less than fair market value.

So called “Medicaid trusts” are another option. However, recent changes in federal law make it more difficult to have a trust and still qualify for Medicaid. Recent policy states the following:

Where an individual, his or her spouse, or anyone acting on the individual’s behalf, establishes a trust using, at least, some of the individual’s funds, that trust can be considered available to the individual for purposes of determining eligibility for Medicaid.

Certain trusts are not counted as being available to the individual. They include the following:

• Trusts established by a parent, grandparent, guardian, or court for the benefit of an individual who is disabled and under the age of 65, using the individual’s own funds.
• Trusts established by a disabled individual, parent, grandparent, guardian, or court for the disabled individual, using the individual’s own funds, where the trust is made up of pooled funds and managed by a non-profit organization for the sole benefit of each individual included in the trust.
• Trusts composed only of pension, Social Security, and other income of the individual, in states which make individuals eligible for institutional care under a special income level, but do not cover institutional care for the medically needy.

In all of the above instances, the trust must provide that the state receives any funds, up to the amount of Medicaid benefits paid on behalf of the individual, remaining in the trust when the individual dies.

A trust will not be counted as available to the individual where the State determines that counting the trust would work an undue hardship.

Reverse Mortgage or Equity Conversion

Reverse mortgages and other forms of home equity conversion are often viable alternatives for those who wish to remain at home. Seniors can borrow money against the equity in their homes and defer repayment until they die or sell their house. However, for these options to make sense, a home must have a high monetary value and be fully or mostly paid for. Moreover, the individual must intend to stay in the home for the long-term.

Related Guide: Please see the Financial Guide: REVERSE MORTGAGES: How They Can Enhance Your Retirement.

Other Sources of Income

Developing other income sources is an option that many older persons overlook. If you are retired, you might want to get a part-time job. If you are currently working, you might work a few years longer than you had planned. You might consider either renting part of your home or selling your current home in order to invest the proceeds.

Self-Insurance

Even though self-insurance – paying for costs yourself if they arise – is a gamble even though it is the current strategy of choice for most people. Self-insurance makes the most sense for people with major assets ($2 million or more), for those who can afford a long nursing home stay, and for people of modest means (under $400,000) who would quickly qualify for Medicaid anyway.

Premiums for LTCI vary greatly, depending on your age at the time of purchase, the comprehensiveness of the coverage, and the company selling the plan.

According to the 2023 Long-Term Care Insurance Price Index survey published by the American Association for Long-Term Care Insurance (AALTCI), a traditional policy valued at $165,000 in benefits can cost $900 annually for a 55-year-old male. The equivalent coverage for a 55-year-old woman is $1,500. A couple both age 65 could expect to pay $3,750 combined. The two policies could provide each with $165,000 of future benefits. Adding an option that increased future benefits (inflation protection) by three percent annually would cost the couple almost twice as much ($7,150 combined). Costs vary significantly from insurer to insurer even for identical policies so it’s always a good idea to shop around.

Here are some general guidelines that suggest buying LTCI:

• Your net worth is more than $400,000 (not counting the value of the primary residence)
• You can pay premiums without having to “go without”
• You could continue to afford the premiums, even if they increased by 20 or 30 percent in the future.

Long-term care premiums are tax deductible. For example, if you are between 60 and 70 years of age in 2023, you can deduct up to $4,770 (up from $4,510 in 2022).

Related Guide: Consider the possibility of receiving benefits under a disability policy, please see the Financial Guide: DISABILITY BENEFITS: How To Get All That You’re Entitled To

If you decide that LTCI is your best option, it is important to shop around for the right company. Some states have enacted important consumer protections in the LTCI area while others have not. Do not assume that a company is a safe bet just because it is licensed by the state insurance department to sell LTCI.

Seek independent advice from your financial advisor before buying. Use a local independent agent or broker who has been recommended by someone reliable. Do not buy from an agent who sells door-to-door.

No matter how good a policy sounds, it is worth little if the company won’t be there when it comes time to pay. Buy from a company with strong financial reserves. Unfortunately, there is no foolproof method for determining which companies are financially strong. However, it pays to look up a company’s rating by A.M. Best or Standard and Poor’s, both of which evaluate the financial health of insurance companies.

Purchase long-term care insurance from a company that has an A+ or A++ rating from Best or an A, AA, or AAA rating from Standard and Poor’s. Most public libraries have these references.

Read the policy from cover to cover. Do not rely on marketing literature. When you compare LTCI policies, consider the following features:

Flexibility

A policy that covers nursing homes should also cover assisted living, a better alternative for many people who can no longer live on their own. If you want a policy with home care, look for one that offers a full range of community-based services, including adult day care, or that pays you a monthly cash allowance to spend as you please for care.

If you lack family caregivers you can count on far into the future, avoid buying a policy with home care coverage-it will not be sufficient to enable you to stay at home.

Eligibility

Look for a policy that bases eligibility on the need for help with activities of daily living. Policies that pay only for medically necessary care are not usually a good buy.

To be sure you are covered for Alzheimer’s disease, choose a policy that covers cognitive as well as physical disability and pays benefits if you meet either criterion.

Inflation

If you purchase a policy before the age of 75, inflation protection is essential to ensure adequate coverage if you need long-term care in the future.

Buy a policy that has an additional cost but automatically increases benefits at the rate of 5 percent annually.

If you cannot afford inflation protection, either choose a less comprehensive policy or do not buy LTCI at all.

Duration

Keep in mind that the chances of needing long-term care for five years or longer are relatively small. For most people, a policy covering two or three years will be more cost-effective.

Resist pressure to buy the first policy you see. Compare it with at least two others.

An individual who the Social Security Administration determines to be “disabled” receives an Award Letter, which is a notice of decision that explains how much the disability benefit will be and when payments start. It also tells you when you can expect your condition to be reviewed to see if there has been any improvement

Planning Aid: Disability Benefits gives a general overview of social security disability benefits.

You never have to pay for information or service at Social Security. Some businesses advertise that they can provide name changes, Social Security cards, or earnings statements for a fee. All these services are provided free by Social Security.

Generally, a worker is entitled to disability if they are:

1. “Insured” for disability (i.e., have accumulated sufficient credits in the Social Security system). Under age 65.
2. Have been disabled or are expected to be disabled for at least 12 months.
3. Have filed an application for benefits.
4. Have completed a five-month waiting period.

In general, to get disability benefits, you must meet two different earnings tests:

• A “recent work” test based on your age at the time you became disabled; and
• A “duration of work” test to show that you worked long enough under Social Security.

Certain blind workers only need to meet the “duration of work” test.

Disability is generally defined as the inability to perform substantial gainful activity due to a medical or mental impairment. Social Security pays benefits to people who cannot work because they have a medical condition that is expected to last at least one year or result in death. Federal law requires this very strict definition of disability, and meeting this definition under Social Security is difficult.

If you are getting disability benefits on your work record or a deceased spouse’s record, your payments cannot begin before the sixth full month of disability. Your first payment may include back benefits if the sixth month has passed.

Your Social Security disability benefit may be reduced if you are eligible for workers’ compensation, other public disability payments, or a pension from a job where you did not have to pay Social Security taxes (discussed later). You can expect your payment amount to go up in future years. Whenever the cost of living goes up in a year, benefits will be increased by that amount the following January. If there is an increase, you will get a notice about it.

If a person claiming to be a Social Security employee visits you to talk about Social Security or SSI, ask for identification. A bona fide Social Security employee will gladly show you proper identification. If you have any doubts, check with SSA. Remember: Social Security employees will never ask you for money to have something done. It is their job to help you.

Some people who get Social Security must pay taxes on their benefits. About one-third of our current beneficiaries pay taxes on their benefits. You will only be affected if you have substantial income in addition to your Social Security benefits. You must pay taxes if you file a federal tax return as an “individual” and your combined income is more than $25,000. Combined income is the total amount of your adjusted gross income + nontaxable interest + 1/2 of your Social Security benefits. If you file a joint return, you may have to pay taxes if you and your spouse have a combined income of more than $32,000. If you are married and file a separate return, you will probably pay taxes on your benefits.

When to Expect Them

Your check should arrive on the third day of every month. If the third falls on a Saturday, Sunday, or legal holiday, you will receive your check on the last banking day before that day. The check you receive is the benefit for the previous month, i.e., the check you receive dated July 3 is for June.

Form of Payment

Your benefit can be deposited directly into your bank account or paid through the Direct Express card program. The money is deposited on the second, third, or fourth Wednesday, depending on your day of birth. For more information: Schedule of Social Security Benefit Payments for 2023.

Direct Deposit. Direct deposit of your check is safe, reliable, and convenient.

Questions about direct deposit and Direct Express can be answered by your financial institution or any Social Security office.

Direct Express. Direct Express is a prepaid debit card that does not require a bank account but still gives you the same advantages as direct deposit.

It is especially important to tell Social Security about any change in your mailing address when you receive your benefits by direct deposit. If you decide to change the account or the financial institution where your benefits are going, keeping the old account open until the first benefit is received in your new account is important. It usually takes one or two months to process the change from one bank or account to another.

Duration of Payments

Your disability benefits generally continue for as long as you cannot work and your impairment has not medically improved. They will not necessarily continue indefinitely, however. Because of advances in medical science and rehabilitation techniques, many people with disabilities recover from serious accidents and illnesses. Also, many individuals, through determination and effort, overcome serious conditions and return to work despite them.

If you become the parent of a child after you begin receiving Social Security benefits and the child is in your care, be sure to notify SSA so that the child can also receive benefits.

If you are still getting disability benefits when you reach full retirement age, your benefits will be automatically changed to retirement benefits, generally in the same amount. You will receive a new booklet explaining your rights and responsibilities as a retired person. If you are a disabled widow or widower, your benefits will be changed to regular widow or widower benefits (at the same rate) at 60. You will receive a new instruction booklet that explains the rights and responsibilities of people who get survivors benefits.

After you receive disability benefits for 24 months, you will be eligible for Medicare. You will get information about Medicare several months before your coverage starts. If you have permanent kidney failure requiring regular dialysis or a transplant or you have amyotrophic lateral sclerosis (Lou Gehrig’s disease), you may qualify for Medicare almost immediately.

You should promptly report any changes affecting your disability benefits. Family members receiving benefits also should report events that might affect their checks. The events that must be reported are explained in this section.

If you work while receiving disability payments

Notify SSA if you take a job or become self-employed, no matter how little you earn. Tell them how many hours you expect to work and when your work starts or stops. If you still are disabled, then you will be eligible for a trial work period, and you can continue receiving benefits for up to nine months. Also, tell SSA if you have any special work expenses because of your disability (such as specialized equipment, a wheelchair, or even prescription drugs) or if there is any change in the amount of those expenses.

If you receive other disability benefits

Social Security benefits for you and your family may be reduced if you are eligible for workers’ compensation (including payments through the black lung program) or disability benefits from certain federal, state, or local government programs. You must tell SSA if:

• You apply for another type of disability benefit;
• You receive another disability benefit or a lump-sum settlement; or
• Your benefits change or stop.

If you are offered services under the Ticket to Work Program

Social Security may send you a Ticket that you can use to obtain services to help you go to work or earn more money. You may take the Ticket to your state vocational rehabilitation agency or an Employment Network of your choice. Employment Networks are private organizations that have agreed to work with Social Security to provide employment services to beneficiaries with disabilities. Your participation in the Ticket Program is voluntary, and the services are provided at no cost to you.

If you move

When you plan to move, give SSA your new address and phone number as soon as you know them. Also, let them know the names of any family members who are getting benefits and are moving with you. Even if you receive your benefits by direct deposit, the social security office must have your correct address to send you letters and other important information. Your benefits will be stopped if they are unable to contact you. You can change your address here. Be sure you also file a change of address with your post office.

If you change direct deposit accounts

If you change financial institutions or open a new account, be sure to say that you want to sign up for direct deposit. You also can change your direct deposit online if you have a personal identification number and a password. Or, SSA can change your direct deposit information over the telephone. Have your new and old bank account numbers handy when you call. It takes about 30-60 days to change this information. Do not close your old account until you make sure your Social Security benefits are deposited into the new account.

If you are unable to manage your benefits

Sometimes, people are unable to manage their money. When this happens, Social Security should be notified. They can arrange to send benefits to a relative or another person who agrees to use the money to take care of the person for whom the benefits are paid. The person who manages someone else’s benefits is called a “representative payee.”

People who have “power of attorney” for someone do not automatically qualify to be the person’s representative payee. For more information, ask Social Security for A Guide For Representative Payees (Publication No. 05-10076).

If you get a pension from work not covered by Social Security

If you start receiving a pension from a job for which you did not pay Social Security taxes – such as the federal civil service system, some state or local pension systems, nonprofit organizations, or a foreign government – your Social Security benefit may be reduced. Also, be sure to notify SSA if the amount of your pension changes.

If you get married or divorced

If you get married or divorced, your Social Security benefits may be affected, depending on the kind of benefits you receive.

If your benefits are stopped because of marriage or remarriage, they may be started again if the marriage ends.

If you change your name

If you change your name by marriage, divorce, or court order, you must tell SSA immediately. If you do not give them this information, your benefits will be issued under your old name, and if you have direct deposit, payments may not reach your account. If you receive checks, you may not be able to cash them if your identification differs from the name on your check.

If you care for a child who receives benefits

If you receive benefits because you are caring for a disabled worker’s child who is younger than age 16 or disabled, notify SSA right away if the child leaves your care. You must give them the name and address of the person with whom the child lives.

A temporary separation may not affect your benefits if you continue to have parental control over the child; however, your benefits will stop if you no longer have responsibility for the child. If the child returns to your care, SSA can start sending your benefits to you again.

Your benefits usually stop when the youngest, unmarried child in your care reaches age 16 unless the child is disabled.

If you become a parent after entitlement

If you become the parent of a child after entitlement (including an adopted child), let SSA know so they can determine if the child qualifies for benefits.

If a child receiving benefits is adopted

When a child receiving benefits is adopted by someone else, let SSA know their new name, the date of the adoption decree, and the adopting parent’s name and address. The adoption will not cause the child’s benefits to stop.

If you have an outstanding warrant for your arrest

You must tell SSA if you have an outstanding arrest warrant for any of the following felony offenses:

• Flight to avoid prosecution or confinement;
• Escape from custody; and
• Flight-escape.

You cannot receive regular disability benefits or any underpayments you may be due for any month with an outstanding arrest warrant for felony offenses.

If you are convicted of a crime

Tell SSA immediately if you are convicted of a crime. Regular disability benefits or any underpayments that may be due are not paid for the months a person is confined for a crime. Any family members eligible for benefits based on that person’s work may continue to receive benefits.

Monthly benefits or any underpayments that may be due usually are not paid to someone who commits a crime and is confined to an institution by court order and at public expense. This rule applies if the person has been found:

• Not guilty by reason of insanity or similar factors (such as mental disease, mental defect, or mental incompetence); or
• Incompetent to stand trial.

If you violate a condition of parole or probation

You must tell SSA if you are violating a condition of your probation or parole imposed under federal or state law. You cannot receive regular disability benefits or any underpayment that may be due for any month in which you violate a condition of your probation or parole.

If you leave the United States

If you are a U.S. citizen, you can travel to or live in most foreign countries without affecting your Social Security benefits. There are, however, a few countries where Social Security payments generally cannot be sent to. These countries are Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, and Vietnam. In addition, U.S. Department of the Treasury regulations prohibits making payments if you are in Cuba or North Korea.

Let SSA know if you plan to go outside the United States for a trip that lasts 30 days or more. Tell SSA the name of the country or countries you plan to visit and the date you expect to leave the United States.

They will send you special reporting instructions and tell you how to arrange for your benefits while you are away. Be sure to notify SSA when you return to the United States.

If you are not a U.S. citizen and you return to live in the United States, you must provide evidence of your non-citizen status to continue receiving benefits. If you work outside the United States, different rules apply in determining whether you can get your benefits.

For more information, ask any Social Security office for a copy of Your Payments While You Are Outside The United States (Publication No. 05-10137).

If your citizenship status changes

If you are not a U.S. citizen, let SSA know if you become a U.S. citizen or if your non-citizen status changes. If your immigration status expires, you must give SSA new evidence that shows you continue to be in the United States lawfully.

If a beneficiary dies

Let SSA know if a person receiving Social Security benefits dies. Benefits are not payable for the month of death. That means if the person died at any time in July, for example, the check received in August (which is payment for July) must be returned. If direct deposit is used, also notify the financial institution of the death as soon as possible so it can return any payments received after the death.

Family members may be eligible for Social Security Survivors Benefits when a person getting disability benefits dies.

If you are receiving Social Security and Railroad Retirement benefits

If you receive both Social Security and Railroad Retirement benefits based on your spouse’s work and your spouse dies, you must tell SSA immediately. You will no longer be eligible to receive both benefits. You will be notified of which survivor benefit you will receive.

You can report a change by calling the Social Security Administration at (800) 772-1213 or visiting any SSA office. You can also visit the Social Security Administration website. If you send a report by mail, be sure to include the following information:

• Your name, and if different, the name and Social Security claim number of the person on whose account you get benefits
• Name of person(s) about whom the report is made
• Your Social Security claim number
• What new information is being reported
• Date of the change
• Your signature, address, phone number, and date

If you are getting benefits on somebody else’s record (e.g., a spouse), SSA needs their Social Security number as well.

Under federal law, all disability cases must be reviewed occasionally. This review ensures that people receiving benefits are still considered disabled and meet all other requirements. Your benefits generally will continue unless there is strong proof that your condition has medically improved and there is evidence that you can return to work.

Frequency of Reviews

How often your case is reviewed depends on the severity of your condition and the likelihood of improvement. The frequency can range from six months to seven years. Your Certificate of Award states when you can expect your first review.

Here are general guidelines for reviews:

Improvement expected – If medical improvement can be predicted when benefits start, your first review should be six to 18 months later.

Improvement possible – If medical improvement is possible but cannot be predicted, your case will be reviewed about every three years.

Improvement not expected – If medical improvement is not likely, your case will be reviewed only about once every five to seven years.

What Happens During a Review

After you get a letter announcing the review, someone from your Social Security office will contact you to explain the review process and your appeal rights. You will be asked to provide information about any medical treatment and work you might have done. Then your file will be sent to the state agency that makes disability decisions for Social Security. An evaluation team that includes a disability examiner and a doctor will carefully review your file and request your medical reports. If reports are not complete or current enough, you may be asked to have a special examination or test that the government will pay for.

Once a decision is reached, SSA will send you a letter explaining it. If SSA decides you are still disabled, your benefits will continue. If they decide you are no longer disabled, you can file an appeal (see below); otherwise, your benefits will stop three months after SSA determines that your disability has ended.

Even after you start receiving disability benefits, you may want to try working again. Under this program, Social Security and Supplemental Security Income disability beneficiaries can get help with training and other services they need to go to work at no cost. Most beneficiaries will receive a “ticket” to take to a provider they choose who can offer the needed services. To learn more about this program, ask for Your Ticket To Work (Publication No. 05-10061).

For more information about helping you return to work, ask for Working While Disabled – How We Can Help (Publication No. 05-10095). A guide to all of SSA employment supports can be found in the Red Book, A Summary Guide to Employment Support for Individuals with Disabilities Under the Social Security Disability Insurance and Supplemental Security Income Programs (Publication No. 64-030).

“Substantial” Work

To understand how work affects your disability benefits, you must understand how Social Security measures your work. Disability benefits can only be paid if you are unable to do any “substantial” work, referred to as “Substantial Gainful Activity” (SGA) by the SSA. The amount of your earnings determine whether your work is substantial. The Substantial Gainful Activity (SGA) amount for persons with disabilities other than blindness is $1,470 per month in 2023. For persons who are blind, the amount of earnings that indicate SGA is $2,460 per month in 2023.

If you are self-employed, your disability is blindness, and you are age 55 or older, special rules apply.

Nine-Month Trial Work Period (TWP)

You can continue to receive benefits for up to nine months while you try to work. The months need not be consecutive, but they must occur within a 60-month period. Generally speaking, a “trial work” month is any month in which you earn over $1,050 in gross wages for 2023 or spend 80 hours in your own business (regardless of the amount of earnings). You will receive your full benefits during this period as long as you report your activity and remain disabled. If you recover during a trial work period, your benefits will stop after a three-month adjustment period.

At the end of nine months of trial work, SSA will decide if you are able to do “substantial” work. If you can, your benefits will stop after a three-month adjustment period. If you are not able to work, your payments will continue.

36-Month Extended Period of Eligibility (EPE)

If your benefits stop because you have returned to work even though you are still medically disabled, you receive special “benefit protection” for the next 36 months. During that time, you can receive a benefit for any month your earnings fall below $1,470 (SGA amount in 2023). You do not have to file a new application, but you do have to notify Social Security. If you are unable to continue working, your benefits continue indefinitely so long as you remain disabled.

Medicare Continues

If you are working even though you are still disabled, your Medicare coverage may continue for at least 39 months after the trial work period. Beyond that, you may purchase coverage with a monthly premium.

Help With Work Expenses

If you need certain equipment or services to help you work, the money you pay for them can be deducted from your earnings in deciding whether you are doing “substantial” work. It does not matter if you also need the items or services for daily living (such as a wheelchair).

The cost of medical equipment, certain attendant care services, prostheses, and similar items and services is generally deductible. The cost of drugs or medical services is deductible only if required because of your condition.

Vocational Rehabilitation

When you applied for disability benefits, information about you and your impairment may have been sent to the state vocational rehabilitation agency. If they offer you services and you refuse them (without good reason), your monthly benefits may be withheld. You should call them if you have not heard from them but are interested in receiving rehabilitation services.

Your disability benefits will continue while you receive rehabilitation services. Under a special rule, benefits can continue even if you medically recover while participating in an approved vocational rehabilitation or training program.

If a child is getting checks on your account, you should know several important things about their benefits:

1. When a child reaches age 18, the child’s benefits stop the month before age 18 unless the child remains unmarried and is either disabled or a full-time elementary or secondary school student.
2. About five months before the child’s 18th birthday, the person receiving the child’s benefits will get a form explaining how benefits can continue.
3. A child whose benefits stopped at 18 can have them started again if they become disabled before reaching 22 or becomes a full-time elementary or secondary school student before reaching 19.
4. If a child is disabled, the child can continue to receive benefits after age 18 if they have a disability. The child also may qualify for SSI disability benefits.
5. If a child at 18 is a student, they can receive benefits until age 19 if they continue to be full-time elementary or secondary school students. When a student’s 19th birthday occurs during a school term, benefits can be continued for up to two months to allow completion of the term.
6. Social Security should be notified immediately if the student drops out of school, changes from full-time to part-time attendance are expelled or suspended, or changes schools. SSA should also be told if the student is paid by their employer for attending school.
7. SSA sends each student a form at the start and end of the school year. It is important that the form be filled out and returned to SSA. Failure to return the form could result in a suspension of benefits.
8. A student can keep receiving benefits during a vacation period of four months or less if they plan to return to school full-time at the end of the vacation.
9. Generally, students who stop attending school can receive benefits again if they return to school full-time before age 19. The student needs to contact Social Security to reapply for benefits.
10. Benefits for the child of someone getting disability benefits always end if the child marries. The must be reported right away.

If you disagree with SSA’s decision, you can appeal it. You have 60 days to file a written appeal by mail or in person with any Social Security office. Generally, there are four levels to the appeals process. They are:

Reconsideration. Your claim is reviewed by someone who did not take part in the first decision.

Hearing Before an Administrative Law Judge. You can appear before a judge to present your case.

Review by Appeals Council. If the Appeals Council decides your case should be reviewed, it will either decide your case or return it to the administrative law judge for further review.

Federal District Court. If the Appeals Council decides not to review your case or disagree with its decision, you may file a civil lawsuit in a Federal District Court and continue your appeal to the U.S. Supreme Court if necessary.

If you disagree with the decision at one level, you have 60 days to appeal to the next level until you are satisfied with the decision or have completed the last level of appeal.

You have two special appeal rights when a decision is made that you are no longer disabled. They are:

Disability Hearing. As part of the reconsideration process, this hearing allows you to meet face-to-face with the person reconsidering your case to explain why you feel you are still disabled. You can submit new evidence or information and bring someone who knows about your disability. This special hearing does not replace your right to have a formal hearing before an administrative law judge (the second appeal step) if your reconsideration is denied.

Continuation of Benefits. While appealing your case, you can have your disability benefits and Medicare coverage (if you have it) continue until an administrative law judge decides. However, you must request the continuation of your benefits during the first ten (10) days of the 60 days mentioned earlier. If your appeal is unsuccessful, you may have to repay the benefits.

Many of us have life insurance; however, very few have long-term disability coverage. Yet according to statistics, workers are more likely to sustain a long-term disability (one lasting longer than 90 days) than dying early. Because long-term disability insurance is fairly expensive, people think workers’ compensation or other sources will protect them. However, Social Security, workers’ compensation, and employer-offered long-term coverage are often inadequate. For example, here is a typical disability scenario that could happen to anyone:

Roger Roberts, a former executive for a large company and currently self-employed as a consultant, earns $200,000 per year. Last year, his osteoarthritis suddenly worsened, and he could no longer bend his back, lift anything, or stand in one place for longer than a few minutes. Roger was forced to discontinue his consulting business and attempted various career changes, none of which panned out. Fortunately for Roger, he had taken out a disability policy years ago and had continued paying the $2,000 per year premiums. The policy will now pay him $20,000 per year in benefits – a badly needed income.

If your employer provides long-term disability coverage, which must usually be paid for by the employee, then it’s a good idea to buy it. The premiums are probably discounted from what you’d pay for a private policy.

However, look at what the employer-offered policy covers, and buy a private policy if you need it. Many employer-provided group policies are inadequate in that they limit either the term of the coverage or the amount of benefits paid. For instance, benefits may last only a few years, or benefit payments may represent only a small part of executive salaries. As such, check up on the following:

• How long does the disability coverage last?

• How much is the benefit?

Group plans may have a benefit cap of $5,000 per month. Individual plans may also have such a cap.

• For what percentage of your income are you covered?

Generally, you cannot obtain insurance for more than 60 percent of your income.

• Who pays the premiums?

Tax-wise, you’re better off paying the premiums yourself instead of having your employer pay them. Why? Because if you pay the premium for your disability benefits using after-tax dollars, your disability benefits are tax-free. On the other hand, if your employer pays the premiums using pre-tax dollars, your disability benefits are taxable.

• If you receive bonuses or commissions, are these covered by the group policy? If not, bonuses or commissions make up a substantial part of your income, and you’ll probably need supplemental coverage.

• What is the definition of disability in the group policy? Own occupation, any occupation, or income replacement? (Please see the discussion of these three terms in the section on private policies.)

Worker’s compensation covers injuries that happen on the job, and the amount of benefits you receive are based on your average salary at the time of your injury. Benefits vary widely from state to state since benefit amounts depend on state provisions. Most states pay benefits for the employee’s lifetime in cases of permanent total disability.

To get details on worker’s comp benefits, contact your state’s Department of Labor.

Veterans whose disability is related to a service-related injury may be eligible for disability benefits in certain states. If you are a veteran, find out whether a disability fund exists in your state.

Social Security provides long-term disability coverage. However, more than half of the individuals who apply for Social Security disability are denied coverage, and the system leaves many gaps. Further, the average monthly payment in 2023, for example, was $1,470 and may not be adequate for many individuals.

Planning Aid: Standard And Poor’s Insurance Ratings allow you to find S & P ratings and financial strength ratings of various insurance companies.

If you decide you need supplemental coverage, here are some things to look for in a private policy, as well as some suggestions for getting the most for your money.

A disability insurance company will usually not cover you for more than 66 2/3 percent of your income. Look for a policy that provides coverage for this level. When you shop for a disability policy, be ready to prove your income level.

The definition of disability in a policy is extremely important. It tells you under what circumstances you will qualify to receive benefits.

Own-occupation coverage pays benefits if you can’t work in your chosen field-e.g., attorney or teacher. Own-occupation policies are the most expensive type of disability coverage because they provide the broadest coverage. (If you cannot perform the duties of your occupation, you can take a job in a related field, make a decent income, and still collect the benefits.)

Any-occupation coverage pays benefits if you can’t work at any occupation for which your education level and training have prepared you. Thus, if you can no longer perform the duties of a nuclear physicist but can teach physics at the college level, you will not receive benefits.

Income-replacement policies, which are less expensive than own-occupation or any occupation, replace whatever portion of your income you are no longer able to earn.

The longer the waiting period before benefits kick in, the less your premium will be. If you have adequate sick leave, short-term disability, and an emergency fund, and can support a longer waiting period, choose a policy with a longer waiting period. Waiting periods are typically 30 to 90 days long but can be as long as 26 weeks.

It’s a good idea to get a benefit period that lasts until the age you start receiving Social Security payments. Be aware that many policies cover you for only two to five years, an inadequate period. Unless you are so young that you haven’t yet had time to qualify for Social Security, a policy that provides lifetime benefits at costly premiums is generally not worth it.

If you are able to work only part-time instead of your previous full-time hours, will you receive benefits? Unless your policy states that you are entitled to residual benefits, you won’t receive anything unless you are totally disabled and unable to work.

Residual benefits may be added on as a rider in some policies.

The difference between these two terms is very important. If a policy is “noncancellable,” you will pay a fixed premium throughout the contract term. Your premium will not go up for the term of the contract. If it is “guaranteed renewable,” your premiums could go up.

Riders and options are additions to policies and cost extra.

Increasing Coverage

An option to increase coverage gives you the ability to buy more coverage without being turned down for health reasons. You will pay about 10 percent of your premium to have this option.

Cost-Of-Living

The cost-of-living rider, which can add 20 to 40 percent to your premium, pays you increased benefits after you become disabled.

Social Security

If you qualify for Social Security disability, the insurer gets to decrease your coverage.

Take this rider if it is available. It will save you money on your premium.

Waiver-of-Premium

This important rider allows you to stop paying premiums once you become disabled.

Weigh the cost of the waiver-of-premium rider against the cost of continuing to pay the premiums after disability.

Return-of-Premium

This option allows you some cash back if you do not collect on your disability coverage after a certain amount of time.

This rider is too expensive, generally about 50 percent of your premium. Don’t take it.

Before buying a policy, check the financial soundness of your insurer. If your insurer goes bankrupt, you may have to shop for a policy later in life, when premiums are more expensive.

• Try to get disability insurance on a low-load (commission) basis. Look at the policies offered by independent agents, but don’t buy insurance from an insurer that doesn’t check out as financially sound.
• If you’re young, consider buying an annual renewable disability income policy similar to term life insurance. Then, when you are older and more able to afford the policy, convert it to a permanent policy.
• Try to get group coverage from a trade association or other organization you belong to.
• If you’re female, look for an insurer with unisex pricing. Otherwise, women will generally pay higher premiums.
• Investigate discounts that may be available.