Are You Covered by the California Disability Program?
Most self-employed individuals in California assume they are covered by the California State Disability Program (SDI). Unfortunately, this is not the case. Each quarter, when you write a check to the IRS for your self employment taxes, you are making a contribution to your Social Security (12.4%) and to Medicare (2.9%). As you can see, SDI is not part of this equation! In order to enroll in the SDI program, you must have your accountant elect for you to be enrolled. Before calling and signing up, there are a few factors you should consider.
COST - The cost of enrolling in SDI is based on a percentage of your income, currently 1.1%.* So, if you make $75,000 this year, you will need to pay $825 per year ($68.75 per month). This percentage is subject to change and often does depending on the amount California is paying out.
SDI vs Private Plan -
| SDI |
Private | |
| Length of Payout | Up to 12 months | Up to age 67 |
| Benefit Payout | Up to 55% of income | Up to 65% of income |
| Benefit Base | Previous 5-7 months income | Fixed amount at time policy is placed. (May be increased based on increases in income |
| Waiting Period for Benefits | Zero. Pay from day one of disability | Ranges based on policy. Typically 90 day waiting period. |
Disability insurance is a very necessary component to your financial plan. Your most valuable asset during your working years is your income. By not protecting this income, you could find your self in a less than desirable situation. To discuss your options for disability insurance in more detail, give Guide My Finances a call. For more information about enrolling in the SDI program, visit Click Here.
* The maximum income level for SDI is $90,699 for 2009. This is the limit on which you will be charged 1.1%
