The SDIR integrates with programs like Social Security and workers compensation to reduce your cost of coverage, offsetting any benefits received from social plans. If you are receiving payments through one of these programs, the insurance company that provides your disability coverage will simply reduce the amount paid to you by the amount of benefit you receive through the social plan.
To give you an example, let’s say that John Doe has a disability policy with a base benefit of $5,200 and his SDIR is $1,800, for a total benefit of $7,000. He is guaranteed to receive the total monthly amount of $7,000 but, if he begins receiving Social Security payments, his SDIR will simply be reduced by the amount of benefit he received from the SSA (Social Security Administration). The foremost advantage of the SDIR is that, even if he doesn’t receive any payment through a social program, the disability insurance company still gives him the entire $1,800 SDIR benefit in addition to the base benefit of $5,200.
Long-term disability insurance is an important component of your overall financial plan, but be wary of the optional riders that can drive up the cost of coverage. Dave’s advice is that, if you have a quality long-term disability plan at the right cost for you, additional bells and whistles won’t be needed. It’s also important to remember that your chance of becoming disabled is limited, so balance this expense with other priorities like term life insurance, health insurance, your retirement plan, among others.