Do you have disability insurance? If so, have you reviewed what’s covered in your policy?

If you don’t have disability insurance, do you know how important it is to your financial future?

Disability insurance is one of the most overlooked pieces of coverage. Most railroaders don’t have it, and they need it. Coverage like Railroad Retirement Board benefits simply do not compare to what a railroad employee is use to making, nor guarantees benefits for long periods of time.

Why is disability insurance important?

Per the Council for Disability Awareness, “one in four 20-year-olds will become disabled before they retire. You may be surprised to discover that accidents aren’t usually the culprit, however. Back injuries, cancer, heart disease and other illnesses cause most long-term absences.”

Imagine being disabled–unable to work for 5 years. Could you pay the bills without having your income to support you?

Per the Railroad Retirement Board, at the end of fiscal year 2015 11,000 members were receiving disability payments with an average taxable benefit of $1,892 a month. Would this amount be enough to cover the monthly bills? Oh, and don’t think your chances of needing disability insurance decreases with time. Forty-three percent of 40-year-olds will have an incident causing long-term disability – defined as lasting 90 days or more – by the time they turn 65.

Also, you must consider that a railroad occupation is considered a high-risk occupation subjecting its employees to more than twice the risk of injuries and illnesses.

  • Imagine a seasoned Conductor with just ten years of service, having a stroke, and no longer being able to speak. How would you get by?
  • Perhaps you’re a switchman or track mechanic… what would happen if you couldn’t walk a mile on uneven track along the ballast due to major knee pain? Or imagine you could not set and release handbrakes due to burning shoulder pain or a terrible rotator cuff injury. Wouldn’t that be a nightmare?

What would you do in these situations? Well, you could always dip into your emergency savings – if you have it. But what happens when you run out of that money and you still can’t work? Do you have a working spouse who makes enough money to cover your income loss? No? What then?

That’s when disability insurance becomes vitally important. It pays you a benefit when a disability causes you to be unable to work. Think of it as “income replacement insurance.”

What types of disability policies are available?

There are two main types of policies:

  1. Short-Term Disability- pays a weekly benefit for up to 52 weeks.
  2. Long-Term Disability- pays a monthly benefit after short term disability ends for up to 10 years.

How do these policies work?

Disability insurance pays you a percentage of your income if you are unable to work due to a covered injury or illness. Due to railroad employees not receiving worker’s compensation benefits, disability benefits help protect you on and off the job.

Many railroaders have access to short-term disability insurance through their carriers or RRB. This taxable benefit will pay a weekly benefit, but does not fully replace your income. You can supplement these coverages if your union sponsors a voluntary group plan. These gap plans pay a tax-free benefit on top of RRB and carrier benefits helping you to replace up to 80% or even 100% of your income.

Even if you replace 100% of your pre-disability income with these short-term policies, as the name implies, you won’t be covered for a disability that sticks around for a long time. In fact, these policies will typically not pay for more than a year. I would recommend considering also having a long-term disability plan as part of your protection approach.

Long-term disability insurance picks up once short term coverage ends by paying a monthly benefit for up to 10 years. RRB does not offer such benefits unless you have 240 months of accumulated service. And even if you do qualify for the disability annuity benefit with RRB, it is important to understand your benefits as it is taxable and very often does not cover enough to avoid financial hardship.

Where can you secure disability coverage?

There are four main sources for railroaders to obtain disability coverage:

  1. Railroad Retirement Board benefits.
  2. Carrier provided benefits.
  3. Individual insurance.
  4. Voluntary Group Benefits provided by your Union.

As previously mentioned, railroaders do very often have access to short-term disability benefits through RRB and carrier benefits. Carrier benefits end after 1 year and to receive a long-term disability benefit from RRB it must be due to an occupational disability.

An occupational disability annuity through the RRB is payable at age 60 if the employee has 10 years of service, or at any age if the employee has at least 20 years of service. Per the Railroad Retirement board the total number of occupational disability recipients at the end of fiscal year 2015 was 23,500 members with an average monthly taxable benefit of $3,025 dollars per month. After taxes that is less than $30,000 a year. Is that enough for you to survive?

You always have the option of going out on your own and buying an individual disability policy. These policies typically have the best coverage, but are significantly more expensive than other options available to railroaders. These policies can cost thousands of dollars a month! Coverage is also not guaranteed, so there is a possibility that you could be denied coverage due to your age, occupation or medical history.

The last option to secure gap coverage on top of RRB and the carrier benefits is a voluntary group disability policy sponsored by your union. These plans are affordable and are guarantee issue, which means you do not have to answer any medical questions to obtain coverage. Gap coverage can pay you up to an additional $2,000 a month tax-free and help replace up to 80% or even 100% of your income.

Are there other types of coverage besides disability that I should consider to help protect my family and I?

Disability insurance is a great start to protecting you and your family, but there are other coverages that can protect your family’s financial future if something unexpected occurs.

Life insurance is an important aspect of a solid protection plan. What happens if you have a career ending and life shortening disability? An affordable group life policy can help protect your family. At Cornerstone all policies are guarantee issue, so you can get up to $300,000 of coverage without having to answer any medical questions. You can also purchase life insurance for your spouse and/or children.

Critical Illness and Accident coverages are another great way to protect your family. These policies pay a lump sum, tax-free benefit for unexpected medical situations ranging from a dislocated shoulder, broken leg, heart attack, or cancer diagnosis. And the great thing about these coverages is that you can cover your wife and children. How helpful would getting $1,000 if your kid breaks a leg at camp or $15,000 if your wife is diagnosed with breast cancer or $30,000 if you have a heart attack?

Cornerstone Benefits Management negotiates with some of the nation’s best insurance companies in the industry to offer railroaders premier insurance protection at competitive group rates. We work with railroaders and their union to ensure proper and seamless administration of their group benefits policies. Railroaders who have coverage on these union group insurance plans advocate for their brothers and sisters to participate in this type of protection by saying: “it’s not whether you can afford this type of income protection, but in our line of work, and in fighting the rail carrier, you cannot afford to NOT have this this type of protection”.