How to Get the Most Out of Your Disability Coverage

What happens when that lower back pain that’s kept you out of work for a month doesn’t go away? Or you’re still having mobility issues months after your knee surgery?

You may be anxious to get back to work after a short-term disability leave, but it’s not always possible.

That’s where long-term disability benefits, including Social Security Disability Insurance (SSDI) and long-term disability insurance come in.

Although often confused with one another by workers, SSDI and long-term disability insurance are not the same thing.

These two programs can, however, work in tandem to provide income replacement due to a long-term—or permanent—disability.

Here’s what you need to know.

What is Long-Term Disability Insurance?

Long-term disability insurance picks up where short-term disability insurance leaves off. It’s designed to provide partial income replacement when you are unable to do your usual work for an extended length of time.

Long-term disability insurance is provided by some employers as an optional employee benefit.

Workers can also purchase individual policies through their financial advisor or insurance broker.

When provided by an employer, long-term disability insurance has an initial eligibility waiting period that is typically covered by a short-term disability insurance benefit.

What is SSDI?

SSDI is a Federal government program that replaces your income in the event of a long-term or permanent disability.

SSDI benefits are based upon your average annual earnings and pay out up to $2,687 per month, as of 2017.

To get an idea of your average annual earnings, review your annual social security statement.

It can be difficult—and time consuming—to qualify for SSDI payments, and you must meet the following long-term disability requirements:

Prove you have at least one severe medical impairment. This must be documented by objective medical evidence.
Prove the condition makes it impossible to return to your past work.
Prove there isn’t other work you could qualify for.
The disabling condition must last at least one full year while being severe enough to make it impossible to actively engage in work.

In many situations, although the disability keeps you from doing your usual work, you would be able to qualify to do other work.

This other work, however, is typically lesser-skilled work outside of your usual compensation levels. That’s why it’s a good idea to supplement it with a long-term disability policy.

How SSDI and Long-Term Disability Insurance Work Together

Because SSDI is based on your lifetime earnings history—not your latest job, it rarely pays even half your current income.

For workers making over $70,000 per year, the $2,687 maximum monthly payment is less than half their income.

Many workers would find it difficult to pay their bills with SSDI funds alone.

However, if you have long-term disability insurance, you can receive up to 60 percent of your pre-injury earnings.

Most long-term disability insurance policies require that you first apply for SSDI. You are able to receive payments from both SSDI and long-term disability concurrently. Your insurance carrier then adjusts your long-term disability insurance payments based on how much you will receive from SSDI.

A long-term physical disability can be a significant financial burden.

Although SSDI provides a minimal safety net for significant disabilities, it’s not enough for most workers to make ends meet. But when combined with a long-term disability insurance policy, it can provide more significant income protection.

About Council for Disability Awareness

Council for Disability Awareness has written 478 posts in this blog.

The Council for Disability Awareness is a nonprofit organization dedicated to educating the American public about the risk and consequences of experiencing an income-interrupting illness or injury. The CDA engages in research, communications, and educational activities that provide information and helpful resources to wage earners, employers, financial advisors, consultants, and others who are concerned about the personal and financial impact a disability can have on wage earners and their families.