Social Security Disability v. Private Disability Insurance

Many employers will offer disability insurance for short-term and/or long-term injury or sickness-related absences from work.  This insurance generally covers a percentage of the employee’s base income for the duration of the disability leave. 

Workers whose employers offer minimal coverage may purchase their own plans, often with higher premiums, but coming with the additional perks of tax-free monthly payments at greater parity with earned income.  If serious disability prevents you from returning to work after the period covered under a “short-term” plan, your insurer may require you to apply for Social Security Disability Insurance (SSDI) to “offset” the costs of long-term coverage.

Applicants for Social Security Disability Insurance have to meet several criteria to prove eligibility.   Generally, one must have worked a certain number of years within a recent period depending on age.  For example, a 24-yr. old applicant must show that he/she has worked at least one and a half of the last three years to qualify for benefits.  Total years of work are also taken into account.  At age 42, for instance, one must have held steady employment for at least a total of five years.  Basically, the SSA wants to know that the applicant has paid Social Security taxes for a sufficient length of time to justify coverage.  You should also be aware that Social Security might maintain stricter guidelines for defining “disability” than your private disability insurer.  To qualify as disabled under Social Security, one must demonstrate “severe” bodily injury or illness restricting one’s ability to work for a year, or which will result in death.  Just because your private insurance policy has covered your disability, therefore, does not necessarily mean that Social Security will follow suit, although appeals with attorney representation are more successful.

Your private insurance plan will deduct the full amount of your social security benefit from your monthly benefit payment.  This is called an “offset.”  Let’s say that a private policy pays the beneficiary $2,000 a month before the implementation of a $1,000 a month Social Security benefit.  After the Social Security benefit kicks in, the $1,000 will be deducted from the monthly payment from the private insurer.   The original $2,000 disbursement will be reduced to $1,000.   The beneficiary will receive $1,000 from the private insurer and another thousand from Social Security.  In the end, the total payment will be the same, but the private insurer will have slashed its costs. You should also remember that it takes months for the SSA to evaluate claims for Disability benefits.  If the benefits are approved, the claimant may be owed back pay covering the period from the initial filing.  The private insurer may request reimbursement in full for the amount of back pay handed out by social security if in fact an equivalent sum had been paid out in the preceding months. 

You should consult with experienced counsel to guarantee that you are receiving the maximum amount to which your insurance policy entitles you.

Articles contained here are not intended to provide legal advice, only providing general information. We encourage individuals to consult with an attorney regarding individual circumstances.