Long-Term Disability vs. Social Security: What’s the Difference?
When you’re unable to work due to a serious injury, illness, or chronic condition, you’ll get a lot of advice. “File for disability” is a common suggestion that doctors, colleagues, and loved ones may offer. But, you’ll quickly find that “disability benefits” come in various forms. Should you file claims with your private or group disability insurance plan or the Social Security Administration?
Sometimes, the answer is “file both.” However, Social Security and disability insurance claims are very different, and you need to understand what each type involves. In this article, the experienced disability lawyers at Bryant Legal Group explain the differences between long-term disability insurance and Social Security disability benefits.
Please note that Bryant Legal Group does not handle standalone Social Security disability claims. However, we are happy to refer you to a qualified attorney if you need assistance.
What Are Social Security Disability Benefits?
Social Security disability benefits are a public benefit program administered by the federal government. You typically must show that your medical conditions will prevent you from working for at least 12 months to be eligible. However, the Social Security Administration does grant “compassionate allowances” for some fatal conditions.
There are two broad types of Social Security benefits:
- Social Security Disability Insurance (SSDI): In addition to proving that you’re disabled, you must have earned a certain number of work credits to be eligible for this program.
- Supplemental Security Income (SSI): These benefits provide financial support to low-income disabled individuals, regardless of their work history.
Some individuals can receive both SSI and SSDI benefits if they do not have significant assets or household income. However, because most of our clients do not qualify for SSI benefits, we’ll focus on SSDI for the remainder of this article.
To qualify for Social Security disability benefits, you’ll need to prove several things:
- You’ve been disabled for at least 12 months (or expect to be disabled for at least 12 months)
- You have severe, “medically determinable impairments”
- You cannot perform any full-time competitive work within the national economy, or your condition is so catastrophically bad that you meet or equal one of the Social Security Administration’s technical “Listings of Impairment”
Proving all these factors can be very challenging. Then, even if the Administration approves your claim, you’ll have to wait five months from your date of disability until you receive your monthly benefits.
What Is Long-Term Disability Insurance?
Many professionals have long-term disability (LTD) insurance coverage, either through their employer or a privately purchased policy. LTD plans are sold and administered by private companies like UNUM, the Hartford, and MetLife. These plans provide financial assistance if you are unable to work due to a medical condition.
LTD policies can vary dramatically depending on their unique terms and conditions. You or your employer may have chosen a policy with a broad definition of “disability,” or your policy may be very limited. The plan may have specific exclusions and limitations that cover your long-term disability claims. Regardless, you’ll need to file a claim with the insurance company and follow specific procedures throughout your claim.
RELATED: Disability Insurance in a Nutshell
How Do Insurance Companies Define “Disability” in LTD Plans?
Compared to SSDI benefits, LTD policies have relatively clear-cut definitions of disability. Your plan probably defines “disability” in one of two ways:
- Own occupation: You are entitled to benefits if you cannot do your actual job due to your medical conditions
- Any occupation: You must show that you are unable to do any type of work due to your disabling conditions
While the “any occupation” definition is similar to Social Security’s approach to disability, many private disability insurance plans include the more flexible “own occupation” definition.
Furthermore, you may have both short-term disability and long-term disability coverage as part of your policy. If you have short-term disability coverage, the insurance company may start paying your monthly benefits within TIME of your last day of work, which is much earlier than Social Security Disability Insurance will ever kick in.
If I Qualify for Social Security Disability Benefits, Why Should I Get Private Disability Insurance?
As a professional, you’ve worked tirelessly to achieve your goals. However, an injury or illness can put everything you’ve worked for at risk. While Social Security Disability Insurance is an important safety net, it’s an imperfect one.
At Bryant Legal Group, we encourage all high-income professionals and entrepreneurs to consider adding private disability insurance to their long-term planning. Here are the fundamental reasons why.
Many LTD Plans Offer a Broader Definition of Disability
As we discussed above, SSDI coverage has a strict interpretation of what constitutes a “disability.” To qualify for SSDI benefits, you must be totally disabled. Partial disabilities do not justify SSDI benefits, nor do short-term disabilities, and this can undermine many legitimate disability claims.
Total disability is quite difficult to prove. You must show that you:
- Automatically qualify due to a specified condition or illness, or
- You are incapable of performing the substantial and material functions of your previous job, that you cannot readjust to alternative work, and that your disabling condition will last at least a year or will lead to your death.
Thanks to this strict definition of “disability,” the Social Security Administration denies most SSDI claims.
In comparison, private disability insurance benefits tend to be easier to qualify for, as the definition of a “disability” under private disability insurance policies is typically broader than the SSDI definition. Private disability insurance plans rarely require a showing of total disability. Instead, many private plans simply require you to prove you cannot work in your existing career. You need not prove that your condition prevents you from working in an alternative career.
If you need help understanding your LTD policy’s definition of disability, consult with an experienced disability insurance lawyer.
Disability Insurance Plans Often Pay More in Monthly Benefits Than Social Security Does
SSDI benefits are quite limited, with a maximum benefit of up to $3,011 per month in 2020. That’s $36,132 in annual Social Security benefits. For middle-class and professional workers, this may not be enough to replace your lost income.
Private insurance disability insurance coverage generally pays out a larger benefit, and in many cases, it will pay out a percentage of your pre-disability monthly income.
Suppose your disability insurance policy will pay you 70% of your total monthly income, and you earned $7,000 a month before you became disabled ($84,000 annually). Your monthly LTD benefit would be $4,900, which significantly exceeds the SSDI maximum benefit.
Dual Benefits are Possible
You can qualify for and collect both private disability insurance benefits and SSDI benefits, but it’s important to note that your SSDI benefits will cut into your private disability insurance benefits.
So, what’s the point?
With an offset rider, the premiums on your private disability insurance policy will be lower than they would be otherwise. Depending on your tolerance for risk, you can lower the immediate cost of your private disability insurance policy while maintaining the same level of benefits.
Disability Insurance Appeals Tend to be Faster
The Social Security Administration frequently denies claims, as do private disability insurance companies. However, the process of appealing the decision of the SSA tends to take quite a bit longer than the appeals process for private disability insurance.
First, you must file a Request for Reconsideration, which asks your state’s Disability Determination Service to reevaluate your claim. Then, if your Request for Reconsideration is denied (which it most likely will be), you’ll need to file another appeal and demand a hearing. The Request for Reconsideration process takes months, and most people have to wait about a year after that before they have a Social Security hearing. And if you need to file additional appeals with the Social Security Appeals Council or in federal court, that will draw out your case even longer.
When you suffer a disabling condition, time is of the essence. You may not have the patience (or financial resources) necessary to wait out a lengthy appeal. Private disability insurance is a way to ensure that your claims are handled promptly. If there are unreasonable delays, then — with the aid of a skilled attorney — you can potentially sue your insurer for bad faith.
Bryant Legal Group: Fighting for Disability Insurance Claimants
Did the insurance company wrongfully deny or unreasonably delay your long-term disability claim? You may be able to challenge the actions taken by your insurer, resubmit your application for benefits, or, depending on the circumstances, sue the insurer for damages.
At Bryant Legal Group, our disability attorneys have successfully represented clients in a variety of disputes with their insurers, including those involving private disability insurance claims. We are deeply committed to our clients and work closely with them through every phase of the disability process.
Call us at (312) 561-3010 or use our online form today to schedule your free consultation with an experienced Chicago private disability attorney. During your initial consultation, we will evaluate your insurance dispute and help you determine the best path forward.
2020 Social Security changes. (n.d.). Social Security Administration. Retrieved from https://www.ssa.gov/news/press/factsheets/colafacts2020.pdf
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.