Working people may need disability insurance to protect their income if they become sick or injured and can no longer work. As you enter retirement, you become eligible for Medicare and Social Security, and you no longer need disability insurance. Many disability insurers will not offer coverage to people above retirement age, or coverage may be prohibitively expensive.
There are other options besides long-term disability insurance, like Social Security disability insurance, that could help older workers who become disabled. But if you didn’t purchase disability insurance when you were younger, you may be out of luck if you need more coverage.
Getting disability insurance before retirement
Because disability insurance is virtually impossible to get after retirement, the best way to make sure you’re covered during your working years is to apply early. Disability insurance, like other types of insurance, is less expensive when you’re younger and healthier, and becomes more expensive as you grow older and develop new health complications.
The following table shows how rates go up with age for someone purchasing disability insurance coverage of $5,000 per month, with a benefit period that last until he or she turns 65, and an elimination period – the wait time between becoming disabled and when monthly benefits start – of 90 days.
Annual premiums by gender
By locking in your premiums early, you ensure that they’ll be the same low rate even as you climb the career ladder throughout life. You can even make sure your benefits match your rising income levels if you purchase the future increase option rider.
If you put off purchasing disability insurance too long, you may develop a pre-existing condition in the intervening years that could make you ineligible for coverage. Other, less serious conditions could result in an exclusion in your policy, meaning that any disability caused by the pre-existing condition is not eligible for benefits.
Disability insurance in your 50s
It’s still possible to get disability insurance in your 50s, even though you’re nearing the age when your disability insurance would expire. Since many people hit the peak of their careers in their 50s, you’ll want to make sure you have disability insurance to maintain your standard of living and keep a roof over your head in the event that a disability causes you to lose your job.
You need disability insurance for as long as you work, but especially as you’re reaching your retirement goals. If you become disabled and don’t have disability insurance, you may have to sell your home or withdraw from your investment accounts to keep paying the bills.
Disability insurance benefits, like your wages, are paid monthly. Because disability insurance is meant to replace your after-tax income, you should choose a benefit amount that comes out to roughly 60% of your monthly income. Since your income at age 50 will likely be higher than it was at age 25, you’ll also need a higher benefit amount if you’re purchasing disability insurance for the first time. A licensed representative at Policygenius can help you find a disability insurance policy that fits within your budget.
Disability insurance in your 60s
As you enter your 60s, you no longer need disability insurance. That’s because if you’re like most people, you’re longer working, and you become eligible for Social Security, Medicare, and other programs to supplement the income of seniors.
If you were receiving disability insurance benefits from a policy you purchased in younger years, you may be nearing the end of the policy’s benefits period. Most insurers cap benefits periods at either age 65, but some can go as high as age 70.
Even if you wanted disability insurance, you wouldn’t be allowed to purchase it. Because seniors have higher rates of illnesses and injuries, most disability insurance companies won’t sell the product to people over age 60. And because premiums go up so much with age, it would not be cost-effective to purchase coverage so late in life, when you may have only your nest egg and Social Security benefits to live off of.
Group disability insurance
Many senior citizens find themselves working beyond the age at which they expected to retire. If you’re still employed when you’re in your 60s, check with your employee benefits administrator about group disability insurance.
Group disability insurance may offer lower coverage amounts and shorter benefits periods than disability insurance purchased on your own, but it could still cover you in your 60s when individuals plan would expire. However, some carriers may reduce your maximum benefit amount when you reach age 65 and beyond.
Long-term care insurance
Long-term care insurance functions a little like disability insurance in that it only starts paying out when your health has greatly deteriorated. It covers your expenses when you can’t care for yourself anymore, like having to move into a nursing home or an assisted-living center.
Long-term care coverage can also pay for a home health aide. These services can cost on average between $82,000 and $92,000 per year out of pocket, per the U.S. Department of Health and Human Services, and long-term care insurance would cover all or part of those expenses.
However, as with other types of insurance, you have to purchase long-term care insurance before you need to use it. That means chipping away at your retirement savings, or putting your Social Security benefits toward the premiums. Because premiums for long-term care insurance average $2,772 per year (in 2015, according to the National Association of Insurance Commissioners), it may be unaffordable for many senior citizens.
As with disability insurance, pre-existing conditions may be excluded or cause your application for coverage to be rejected.
Medicare and Medicaid
Medicare Part A will pay for some of the costs that overlap with long-term care insurance, but not all. These include “skilled nursing services”, such as treating a wound, but not “custodial services”, like helping you get dressed. Long-term care insurance covers both of those types of care.
The good news is that if you’re eligible for Medicaid, your benefits provider should pay for custodial services while your Medicare coverage pays for the skilled nursing services. Because you don’t pay premiums for Medicare Part A and Medicaid, if you’re eligible for both of these benefits programs then it may be more cost-effective to forgo long-term care insurance.
Social Security disability insurance
Senior citizens can get Social Security disability insurance (SSDI), but it may not be worthwhile if they’re already receiving Social Security benefits. For one, SSDI is difficult and time-consuming to qualify for, and your benefits could be partially reduced by a percentage of your Social Security benefits. After age 66, your SSDI benefits could be decreased to nothing.
But if you’re in your early 60s and still working, SSDI may provide a lifeline if an injury or illness forces you into an early retirement. As of August 2018, SSDI’s average benefits were $1,198.49 per month. That may not be enough to replace your income, but it could help you pay for your everyday expenses.
In order to qualify for SSDI, you have to meet the Social Security Administration’s definition of disability, which is typically more severe than that of private disability insurance. You also need to have been working for a minimum number of years prior to claiming benefits. For example, to claim Social Security disability insurance benefits at age 50, you need to have worked seven years. It increases from there:
At age 52: seven and a half years
At age 54: eight years
At age 56: eight and a half years
At age 58: nine years
At age 60: nine and a half years
Supplemental Security Income
The Supplemental Security Income (SSI) program pays a small amount to people who are blind or disabled and have low income and financial resources. If you have a disability, you’re eligible to receive SSI payments between age 18 and age 65 if you meet the agency’s requirements. People over age 65 who don’t exceed the financial limits may be eligible for SSI payments even if they’re not disabled.