If you were to become disabled, would you be able to pay your bills? This is a serious question and one that most people do not give enough consideration to because we all prefer to believe that disability could not happen to us.
In fact, however, the CDC reports that one in four American adults have a disability, even if that doesn’t prevent them from working. It’s a good reminder that we should all anticipate this possibility, but it’s important that you understand the legal and financial issues that can come into play if your ability to work changes.
Social security: the elephant in the room
One of the most common misconceptions about disability and finances is that if you were to become disabled, you would be financially supported by Social Security, as well as other social protection programs like Medicaid.
Unfortunately, not only is Social Security expected to be insolvent by 2033, it is very difficult to qualify for disability benefits and they tend to be quite minimal even if you qualify for them. Thus, the majority of people with severe disabilities live below the poverty line, especially if they have never been able to work or have worked very little before acquiring their disability.
Alternative supports: Private disability insurance
Since Social Security programs can be so difficult to access, another option you might want to consider is investing in a private disability insurance policy. Just like other insurance policies, these plans exist to provide you with essential financial support, and they tend to be much more flexible and generous than federal programs.
Policies, such as those offered by Breeze Long Term Disability Insurance, are a good option to replace part of your income if you become unable to work due to illness or injury. These policies allow you to face your bills while focusing on your recovery, rehabilitation or treatment.
Another advantage of private policies is that, unlike SSI and SSDI, you can still collect part of your long-term disability insurance if you have to have a less intensive and lower paying job due to your health. A private policy will almost certainly pay faster than you might qualify for any federal program.
Facing your debt: negotiations and discharge
Since your finances may suffer if you become disabled, it is important that you have a plan to deal with your existing debt. Paying it off can become excessively heavy, even if the amount is quite small. Fortunately, you have a few options on this front.
First, if you are late with payments and these invoices are collected, you can negotiate with the collection agency. Most are allowed to take a reduced payment upfront; especially for older debts, collection agencies usually buy debts from the original creditor for a reduced amount in the hope of making some profit. Many will go even lower than that first reduced amount in order to settle the bill – especially if you can prove that the disability has hurt your financial situation since the debt was incurred.
Another common debt that people face when they become disabled is student debt. Americans are in the midst of a student debt crisis, and contrary to popular belief, it’s the less educated people – often those with incomplete college degrees or a bachelor’s degree from a local college – who tend to have the most unmanageable debt.
Fortunately, if you have federal student loans, you may be eligible for the government’s disability loan release program. Again, it may take a while to get approved for this program, but if you can cut down on the bureaucracy, it will wipe out your debt.
It’s understandable that people are afraid to talk about disability and are even more willing to actively plan for it, but ignoring the problem won’t make it go away. You need to know what resources might be available to you and have a plan for your financial future. You’ll have a lot of work to do if you become disabled, so tackle it now so you don’t have to worry about it later.