Short-Term/Long-Term Disability vs Social Security Disability

There are two types of disability: one is a private disability, and the other is Social Security Disability (SSD). Private disability is an option your employer may provide to you, although it is not required. You could also purchase your own private disability for short and/or long term disability. Generally, private disability includes both short-term (up to 3 months), and long-term (anywhere from two years to indefinite) disability benefits. The other type of disability is SSD insurance (SSDI). The SSDI program is a mandatory government insurance program set in place to help individuals with both monetary and health insurance benefits while they are out of work. This program differs from private disability in that you need to show you have been disabled for a 12-month time frame or you will be disabled for at least 12-months.  Also, you need to show that you are incapable of not only performing your past work, but also any other type of work in the national economy. You can apply for STD/LTD at the same time applying for SSDI. 

An insurance policy that your buy to protect yourself and your family if you become unable to work for a long time, long-term disability insurance is usually purchased through your employer. If your employer does not offer disability insurance, you can purchase it yourself through an insurance agent. Sometimes you may purchase short-term and long-term disability insurance.

It is possible to receive long-term disability insurance benefits and SSDI at the same time. Some long-term disability insurance policies even require that you apply for SSDI benefits after a specific timeframe so you may be able to continue receiving benefits. After you have been approved to receive SSDI benefits, your long-term disability insurance provider will pay you the difference between your SSDI benefits and your insurance policy amount. The amount of the offset depends on your specific long-term disability plan’s terms and the amount of SSDI benefits that you receive each month.

Whether you want long-term disability insurance or Social Security disability insurance may hinge on the cost to you. You purchase long-term disability insurance with premiums, monthly or annual charges that are calculated based on such variables as your coverage needs, medical history, and benefits period length. As long as you’ve kept up with your premiums, your LTD coverage remains in effect. On average, premiums cost about 1% to 3% of your income.

By contrast, Social Security disability insurance is free to you, just like other government sponsored benefits programs. If you can’t afford disability insurance premiums, SSDI may be your only option.

But if you can afford disability insurance premiums, consider taking out private coverage rather than relying on SSDI. Besides the high probability of being rejected for benefits, even those who are eligible for SSDI often wait many months to receive coverage as they try to prove the extent of their disability to Social Security Administration officials and then disability judges. During that time, you could’ve been earning long-term disability benefits.

Long-term disability insurance and Social Security disability insurance differ in another key way: how and when you can get covered under either. You apply for LTD before you become disabled, so when you need coverage it’s there as long as you’ve been paying your premiums. You apply for SSDI after you become disabled.

Social Security disability benefits are very difficult to claim. There are five stages in the approval process that essentially determine not only whether you’re disabled, but also whether you may recover or adapt to other types of work. If you’re so disabled that you can’t do your old job, but not so much that you can’t do another, less labor-intensive or mentally taxing one, then you’ll be denied benefits, even if your new job pays you less money. A lawyer who has a limb amputated, for example, won’t be eligible for benefits if he or she can wear a prosthesis or continue doing case research.

Long-term disability insurance benefits are much easier to claim. For one, you can purchase a policy that pays benefits even if you’re able to do other work, which is called an own-occupation policy. (Its opposite is the any-occupation policy, which is more affordable but under which our unfortunate lawyer in the example above would still be denied benefits.) You’ll mainly run into an issue claiming long-term disability benefits if your disability was caused by a pre-existing condition, which your policy may not cover, or criminal activity such as illicit drug use.

If you become disabled, we recommend applying for Social Security disability insurance benefits even if you’re already eligible to receive private long-term disability insurance benefits. Since SSDI doesn’t cost you anything, you lose nothing by applying except the time it takes you get approved.

Social Security disability insurance also comes with an amazing advantage if you need health care. After 24 months of receiving SSDI benefits, regardless of your age, you become eligible to receive Medicare, the U.S. government’s single-payer health care program that is usually only open to retirees. Medicare allows recipients to receive health care at a heavily subsidized and reduced cost or for no cost at all.

If you need helping applying for Social Security Disability or SSI, please contact me at joshben99@gmail.com. I have over 20 years experience with Social Security Disability cases.