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Private Disability Insurance vs. SSDI

All workers risk losing income because of disability but few have closely examined the benefits of private disability insurance vs. Social Security disability insurance (SSDI). In general, disability insurance of any type can help to lessen the economic hardship faced when one becomes unable to work because of a disability. While SSDI provides important protections to workers who have contributed to Social Security long enough, it requires meeting a strict definition of total disability. In many situations, private disability insurance may offer more liberal coverage and larger benefits.

Social Security Disability Insurance

Social Security disability insurance covers 150 million workers, with over 8 million individuals currently collecting benefits. Anyone who has worked a sufficient amount of time while contributing to Social Security is covered by SSDI. Benefits are paid monthly, with the average disabled worker receiving $1,148 a month, or $13,776 a year.

To qualify, applicants must show that they meet Social Security's strict definition of disability. To receive SSDI you must show that:

  • You can no longer work in your previous occupation
  • You cannot adjust to new work
  • Your disability will prevent you from returning to work for at least a year

If you are only partially or temporarily disabled, you cannot receive benefits from SSDI. Further, when you do qualify, Social Security cannot pay out benefits until you have been disabled for at least five months. Social Security considers certain conditions, such as blindness, severe enough that you won't have to prove your inability to work in order to receive benefits.

Private Disability Insurance

About 30% of workers have disability insurance provided through their work. Many others choose to purchase private disability insurance themselves to protect against unforeseen loss of income or to supplement other insurance plans. Though the terms of insurance policies can vary greatly from plan to plan, private disability insurance can offer important advantages over SSDI.

One of the greatest benefits of private disability plans are their more expansive definitions of disability. While SSDI requires a showing of total disability, many plans will pay benefits without requiring an individual to prove that he or she can do no work at all. While definitions vary from plan to plan, three are most common:

  1. "Own occupation" coverage insures policy holders against disabilities that prevent them from performing the duties of their occupation.
  2. "Own occupation" coverage with time limits insures policy holders when they cannot perform their occupational duties, but for a limited time. These policies usually include a "Change in Definition" feature where, after a certain amount of time, the standard moves from "own occupation" to "any occupation." Most commonly, this is after one, two, or five years.
  3. "Any occupation" coverage defines disability as being unable to perform any job. This is a much stricter definition and similar to that used for SSDI.

Under the first two of these definitions, a surgeon who injured her hands would be considered disabled, at least for a time. She would be able to receive benefits to replace her lost income without having to prove that she could do no work whatsoever.

Another advantage to private insurance is that it may replace a greater part of an individual's lost income than SSDI would. SSDI benefits are based on your average lifetime earnings and could not exceed $2,642 a month in 2014. Individuals with private insurance may be able to receive more than this. Many policies cover around 70 percent of a worker's salary at the time when their disability arises.

Receiving Multiple Forms of Disability Benefits

Fortunately, when comparing private disability insurance vs. SSDI, you don't have to take one or the other. It's possible to receive multiple forms of disability benefits at once. If you qualify for SSDI, you can receive payments from both Social Security disability and private insurance. Indeed, many insurers will require that you apply for SSDI, though they may deduct your SSDI payments from your private benefits. Individuals who qualify may also receive benefits from workers' compensation or military benefits for veterans while still receiving private disability and SSDI benefits.

Get Legal Help with Your SSDI or Private Disability Insurance Claim

If you're considering how best to protect yourself against disability or believe you're currently entitled to disability benefits, consider contacting a disability lawyer to discuss the options available to you. 

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