Maybe you’ve heard of long-term disability insurance (LTDI) and social security disability insurance (SSDI) but aren’t sure what the real differences are between the two. You pay for LTDI, and you don’t pay for SSDI. After all, a disability is a disability, right?
While any type of disability insurance can help ease the economic hardship faced in the wake of disability, there are big differences between private disability insurance and SSDI. When trying to determine what kind of disability insurance is best suited to your situation, it’s important to know all the facts.
We’ll be unpacking the differences between LTDI and SSDI for you in this article so you can make an informed decision that best fits your needs.
How Does Long-Term Disability Insurance Work?
With LTDI, you typically pay a monthly premium. Sometimes, you can get disability insurance through your employer, but not every employer offers this.
When you pay your premium, your insurance carrier agrees to pay you benefits if you become unable to work for a long time due to serious injury or illness.
An LTDI policy should spell out:
- The benefit amount,or the monthly amount long term disability will pay you if you become disabled.
- The premium amount, or how much your disability insurance costs month-to-month or annually.
- The elimination period, or how much time you need to wait after becoming disabled before your long-term disability benefits start.
- The benefit period, or the amount of time your long-term disability benefits will last once they start.
- The definition of disability, or the types of conditions your policy will and will not cover.
Unlike LTDI, you don’t pay a monthly premium for SSDI.
Some say that SSDI, which is provided by the government, is free. But nothing is really “free.”
You’re never actively paying for social security disability insurance, but SSDI still requires some “buy-in.” Typically, Social Security is automatically taken out of your paycheck if you’re employed by an organization.
If you have a significant work history with a Social Security record, you may be eligible for SSDI. This is apart from any ability of yours to purchase a private disability insurance policy.
For those who are self-employed, you still need to have a Social Security record. You should be consistently filing a self-employment tax return that shows you have paid the Social Security tax.
This is really important, as you will be required to submit this documentation when you apply for disability benefits.
Social Security requires lots of documentation when you apply for disability income. It can quickly get overwhelming and confusing.
If you believe that you qualify for Social Security disability benefits, it may benefit you to seek disability benefits assistance.
At BenefitsClaim.com, we offer a free online disability case evaluation that is conducted by a legal professional. If you need help determining your eligibility for disability benefits, you can start the process here.
Now let’s look at the difference between private disability insurance benefits and SSDI benefits.
The Benefit Amount
Typically, LDTI pays out more benefits than SSDI. An LDTI policy may cover up to 60% of your gross monthly income should you become disabled.
However, again, you pay a monthly premium. The total cost for an LTDI policy is usually about 1-3% of your annual salary.
The average payout for SSDI is about $1,154 per month as of 2021, which may be significantly less than your gross monthly income while you were able to work. The flip side is that you don’t have to pay a premium because Social Security has already been taken out of your paychecks.
Unfortunately with LTDI, the monthly premium is dependent on your gender and occupation.
If you work a manual labor job, your premium is likely to be higher than that of a professional, even if you have the same income, because of the increased risk of serious injury that leads to disability.
For a woman, her monthly premium is likely to be higher than her male counterpart’s.
The health data that insurance companies look at shows that women suffer from disabilities (such as autoimmune disorders, debilitating mental disorders, and certain cancers) more often than men. Disability claims for women also tend to last longer than for men.
This is beginning to change with certain states, like Massachusetts, who have passed legislation prohibiting insurance companies from factoring gender into the cost of disability insurance coverage.
Premium amounts also increase the longer you wait to buy coverage, since your risk of disability increased as you age.
It may help somewhat to know that the difference in premium amounts are based on health data, but the judgments of insurance companies based on that data can feel pretty unfair.
The reality is that if you are older, female, and/or have a manual labor occupation, you may want to weigh the costs and benefits of paying high LTDI premiums.
Social Security, on the other hand, does not consider gender when evaluating a disability claim application. Whether you are male or female does not impact your eligibility or benefit amount.
What Social Security does consider is your work history. Recency and length of work history matters in this case. Your monthly SSDI benefit depends on “your lifetime average earnings covered by Social Security.”
You are more likely to get an increased SSDI benefit if you have paid into Social Security for longer. In other words, if you are older, you may be more eligible to receive a higher amount of disability benefits.
If you have a long and varied work history and have difficult recalling all the details, you have a few options:
- You can fill out and submit a Request for Social Security Earnings Information form. This option does require you to pay a fee.
- You can sign in to your Social Security account at SSA.gov and access your earnings records for free.
- You can look at your W2 forms if you’ve saved your tax records.
If gathering information about your work history for your Social Security disability claim application is confusing, we recommend getting a legal professional to help you.
Our team of disability attorneys can assist you with gathering information and documentation for your Social Security disability claim application.
How Long Does It Take to Receive Benefits?
Whether you get private disability insurance or SSDI, there is often a waiting period called the “elimination period.”
For SSDI, it takes five months to begin receiving benefit payments from the date that your application is approved. You would receive the first payment in the sixth month of disability.
So if your disability began mid-June 2022 and you applied for benefits at the beginning of July 2022, your first benefit would be paid during the month of December 2022.
If your disability is amyotrophic lateral sclerosis (ALS), you do not have a waiting period.
Conversely, LTDI can have a much shorter elimination period, depending on what you are willing to pay in monthly premiums. Your options typically include 30-, 60-, 90-, 180-, or 365-day waiting periods starting from the date of approval for your disability claim.
Most people choose a 90-day policy for long-term disability insurance coverage with a moderate premium.
As you weigh your options, it’s important to consider that it is possible to receive LTDI benefits and SSDI benefits at the same time. This may help to alleviate financial distress more than receiving one or the other.
Keep in mind that if you choose to get LTDI coverage and apply for SSDI benefits that your SSDI benefit amount will impact your LTDI benefit amount. In fact, some private insurers require you to apply for SSDI to offset the payout of long-term disability benefits.
Depending on your financial and medical situation, it may be worth paying a monthly premium in order to receive benefits within 30-90 days of approval, rather than waiting five months post-approval for SSDI benefits to kick in.
You may want to seek an objective third-party opinion before you make a final decision.
When Will My Benefits Run Out?
Something else to consider is the difference between benefit periods for LTDI and SSDI.
For LTDI, you are covered for as long as you make full and on-time premium payments. Benefits will last a certain number of month or years or up to a certain age depending on your policy. Typical benefit period options include 2, 5, or 10 years, or until ages 65 or 67.
SSDI is a bit different. Your SSDI benefits will continue for as long as your medical condition sees no improvement and prohibits you from working. If you receive SSDI, you are responsible for reporting any of the following to Social Security:
- You experience a change in your ability to work.
- You return to work.
- Your medical condition improves.
Social Security will check in with your case periodically to ensure you still have a qualifying disability.
Your consideration of LTDI versus SSDI will depend on what your medical condition is, which leads us to how Social Security defines disability differently from private insurance carriers.
Coverage and The Definition of Disability
What a suffering individual may consider a disability may not, unfortunately, qualify as a disability according to Social Security’s definition.
We have a great article on the five criteria that Social Security uses in its definition of disability here.
Since that article goes into a lot of detail, we’ll just give you a quick summary. The five basic questions that Social Security uses to evaluate a disability claim are:
- Are you working? That is, are you able to engage in substantial gainful activity (SGA)?
- Is your condition “severe”? Does your condition significantly limit your ability to work?
- Is your condition found in the list of disabling conditions? You can see the adult listings here.
- Can you do the work you did previously? If you are still able to do so, your claim will most likely be denied.
- Can you do any other type of work? Social Security looks at the transferability of your skill set.
For Social Security disability benefits, the definition of disability is very narrow. Over half of all applications submitted are denied. Decisions can be appealed, but going through the process of appeal can be arduous.
On the other hand, private insurers who offer LTDI usually have a much broader definition of disability.
For example, injuries such as fractures, sprains, and muscle strains as well as pregnancy can be considered disabilities. What private insurance carriers mainly look at is your ability to work.
Some insurers pay out benefits even if you are still able to work, though in a reduced capacity. Others require that you be totally unable to work, which is an “any occupation” definition of disability.
It all depends on what policy you decide to get. Again, some insurers require you to apply for SSDI when you become disabled. Make sure you do your research and get several quotes to compare if you decide to get LDTI.
The Application Process for SSDI
Applying for Social Security Disability Insurance can feel overwhelming because of all the information and documentation you are required to provide.
Social Security mainly asks for the following with documentation:
- Identifying information
- Work history
- Medical history
Often when individuals try to go through the application process on their own, they can overlook simple errors or make mistakes in the input of information. This can result in a denied claim and real frustration on your end.
It can also be a challenge to determine whether you qualify for SSDI in the first place.
You may find it helpful to receive an online disability case evaluation by a legal professional. You’ll have peace of mind knowing that a trained expert is looking at your case.
If your case evaluation specialist determines that you are eligible, you can choose to hire a disability attorney to help you with the application process.
By working with an experienced professional, you will increase the likelihood of approval and that you will receive the full amount of benefits you deserve.
You can start the process by taking our quick survey and entering your contact information. Someone will be in touch with you about your free disability benefits case evaluation.