Social Security Disability Insurance (SSDI) vs. Private Individual Disability Insurance
Many myths float around about disability insurance, but the most common is that there is very little difference between SSDI and private long-term disability insurance. Often, Americans will choose to skip the latter because they think the former will provide for them if they become disabled.
Frank N. Darras, founding partner of DarrasLaw has put together the key differences between Social Security Disability Insurance and private long-term disability insurance for your reference.
The primary difference between Social Security Disability Insurance and private disability insurance as provided by big insurance companies like Unum, Hartford, Standard, Lincoln National, and others, centers on who provides it and the various terms and limitations of those policies.
Social Security is a federal program. Social Security Disability Income (SSDI) is usually provided if (1) the claimant has worked long enough to become eligible and (2) the otherwise eligible claimant meets the program’s definition of disabled.
State and federal governments, on the other hand, do not administer private individual disability insurance—though these companies are subject to government regulations.
Private disability insurance is a contract between the insurance company and the insured to provide a specified amount of coverage if the claimant becomes sick or injured and is unable to do their work according to the insurer’s own definition of disability.
Private disability insurance provides more coverage, and the requirements for eligibility may involve less strict parameters than SSDI. For this reason, people often find the purchase of private individual disability insurance attractive and if you pay for the coverage personally the benefits are tax-free.
Social Security Disability Insurance
SSDI covers more than 150 million workers, with any number of them collecting monthly benefits at any given time. 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
SSDI requires what is known as “total disability.” This means that if your disability is partial (meaning you can still do some work) or temporary (less than a year), then you cannot receive SSDI benefits.
In addition, the elimination period—the amount of time the claimant must wait for payable disability benefits for SSDI benefits is at least five months.
Private Individual Disability Insurance
Private disability insurance allows prospective policyholders to choose a plan that may include more coverage than SSDI. Furthermore, the eligibility requirements are sometimes less stringent.
SSDI requires total disability for any disability, whereas private disability insurers often allow coverage for total and partial disability. If you are disabled, you fall into one of two categories: total disability or partial disability.
Most insurers have their own definitions of these two disability categories:
- “Own occupation” insures policyholders against disabilities that prevent them from performing the substantial duties of their most recent occupation.
- “Any occupation” insures policyholders against disabilities that prevent them from performing the duties of any occupation by which they are trained, educated, or suited, taking into consideration what they made before becoming disabled.
Another Significant Term to Remember
Precise definitions and terms will vary by insurer. There are, however, general concepts, terms, and definitions that are relevant to SSDI vs. private disability.
A significant example is the offset clause.
This clause, which is included in most group employer-sponsored disability insurance policies, allows an insurer to offset the amount of money you receive from it against the money you receive from other income sources like state disability, workers’ compensation, collection from a third party for your injury or sickness.
This means that only a total net amount is payable to you, and an insurance company may reduce payments by the amount you receive from other third parties to ensure that you don’t receive more than this predetermined, total monthly disability amount.
For people with total disabilities, this is particularly important to note, as group employer-sponsored insurance, is most commonly offset by SSDI and any SSDI payments to your dependants.
The Difference Between Social Security and Private Individual Disability Insurance
Remember, SSDI has strict requirements that recipients must meet. Private, individual, or long-term disability insurance will require the insured to pay a premium. But, don’t undervalue the significant hurdles that SSDI will require—if you do, you may end up with no benefits at all.
Social Security Disability Insurance (SSDI) Eligibility Requirements
For SSDI eligibility, you need to earn a certain amount of “work credits” each year you work in a profession where you paid FICA taxes. Your work credits will vary.
Furthermore, to qualify for SSDI benefits, you must meet the definition of disability under the Social Security Act. Generally, SSDI will consider you disabled if you’re unable to work due to a condition that has lasted or is expected to last at least one year and you are un-trainable in any other occupation.
How much you’ll get. Social Security disability benefits are much more modest than many people realize. They are meant to help you meet basic living needs, not replace all of your lost income.
In 2017, Social Security paid an average monthly disability benefit of $1,171. Unfortunately, that is barely enough to keep a beneficiary above the annual 2017 poverty level of $12,060.
How long you’ll have to wait. Processing your application for disability benefits can take an average of three to five months, according to the Social Security Administration.
Chances of denial. According to recent statistics, SSDI rejects more than 70 percent of the initial applications. If you decide to appeal the denial, remember that process can take up to three or more years.
The sooner you can retain a seasoned, compassionate attorney at the top-rated disability insurance law firm DarrasLaw, the more likely we can ensure the approval of your valid disability claim.
Private, Individual, or Group Long-term Disability Insurance
Private individual or long-term disability insurance, like SSDI, can provide income replacement if you suffer a disabling illness or injury and cannot work. Individuals may purchase individual long-term disability insurance through private insurance companies or receive it as an employee benefit through their employer-sponsored group disability plans.
How much you’ll get. Long-term disability insurance policies typically pay 40 to 60 percent of your pre-disability income. They are designed to replace what you normally receive from a post-tax paycheck, and unlike SSDI, are meant to replace enough of your income to provide a livable benefit.
LTD benefits are paid for a specific period of years, some as short as 12 months or as long as your normal retirement age. Every policy is different, so pay attention to the fine print.
How long you’ll wait. There is an elimination (waiting) period following the onset of a disability to qualify for individual and long-term disability benefits. While it varies with each policy, the average elimination period is 90 to180 days.
Chances of denial. Although private disability insurance benefits are easier to qualify for than SSDI benefits, the chances of denial are still high. The definition of disability will vary from policy to policy, so pay attention to specific policy language.
Again, the early involvement of a top-rated disability insurance lawyer at DarrasLaw can lay the groundwork for a successful application, or position you to win your administrative long-term disability appeal if you have received a denial.
SSDI and Private Insurance Denials
If you experience a delay or a wrongful denial by SSDI, a private insurer, or both, you probably have more options than you realize.
If your valid individual or long-term disability claim is wrongfully denied, the seasoned, compassionate disability insurance attorneys at DarrasLaw can help you fight back and win your benefits.
Keep (or retrieve) copies of all correspondence between you and your disability insurer whenever possible. Such documents can include, but are not limited to:
- Any documents providing additional information that your insurance company requested or that you voluntarily sent to the insurance company (like medical documents provided by your treating doctor that support your valid claim).
- Notes and dates from as many phone and email conversations as you had with your disability insurance company—or any other relevant professional—relating to your unreasonable delay, wrongful denial, or appeal. Always try to include things like the day, time, name, and title of the person you talked to, as well as any important information shared or discussed in the conversation.
Find what you can, make note of the documents you remember submitting but can’t locate, and save everything moving forward.
Seeking Out the Right Disability Attorney For Your Situation
If you need to file a claim or already have a denial of your private disability insurance benefits, you need the right law firm on your side. At DarrasLaw, we can assist with these disability claims in many different ways:
- Individual policy analysis
- Delayed claims
- Appealing denied claims
- Monthly claim handling
- Short-term disability
- Long-term disability
- LTD for maternity leave
- ERISA and group coverage plans
- Private individual plans
- Business overhead expense policies
It is never too early or too late in the claim process to obtain terrific legal representation. Some people believe they should file a disability insurance claim and start receiving benefit payments shortly thereafter. However, this rarely happens, and many private disability insurance companies give claimants the runaround to try to reduce benefits or avoid payment altogether.
Never hesitate to seek legal help at the start of the claim process. Doing so can have many benefits, including speeding up your claim and getting your benefits without unnecessary delays or denials. This is highly beneficial if you are losing monthly income because you cannot perform your occupational duties due to a disability.
If you did not have legal help with your initial claim and you now face delays or denials, you want to contact our private disability insurance attorneys as soon as possible. There are deadlines for appealing benefit denials, and you want us to get started building your appeal case right away.
When you need help with a private disability insurance claim, you want the nation’s top disability lawyers on your side.
How Much Does Legal Representation Cost?
When you lose your livelihood due to a disability, the financial stress mounts quickly. Many people in this situation choose not to contact an attorney because they assume they will need to pay extensive legal fees upfront, which seems to be out of the question. The good news is that our disability lawyers do not charge exorbitant hourly fees or retainers—or anything upfront at all.
First, your initial consultation and claim evaluation are always free. This means that you have nothing to lose by contacting us to learn more about our services and how we can help you. There is also no obligation to hire our firm following the free consultation. You can get answers to your important questions at no cost and with no strings attached.
If you choose to hire our firm, we will not charge you any upfront fees for our representation. Instead, if we are successful at getting you benefits, we receive payment as one of the following:
- A percentage of your monthly long-term disability benefits
- A percentage of a lump-sum settlement you receive
Nothing ever comes out of your pocket, which means you have no added financial stress. Remember, having the right disability lawyer can often improve the outcome of your claim and hiring us can often result in additional funds instead of costing you overwhelming fees. To learn more about our intake process and payment structure, contact our legal team directly for your completely free consultation.
What To Do If Your Disability Insurance Claim Was Wrongfully Denied
Insurance companies often act in bad faith and denials may include any of the following and more:
- Requests for independent medical examinations by doctors in the wrong specialty
- Massive, repeated requests for duplicative claim and medical or vocational documentation
- Denials that are unaccompanied by any real explanation or proof
- Failing to make a claim decision within a reasonable amount of time
- Failing to relate relevant policy and benefits information to the claimant or the person filing the claim
At DarrasLaw, our nationwide disability insurance law firm has seen, evaluated, resolved, and won more individual and long-term disability cases than any other lawyer or law firm across the country. Frank N. Darras, our founding partner, and his firms have recovered nearly $1 billion on behalf of disabled people whom insurance companies have wrongly denied insurance benefits.
If your insurer wrongfully denies your valid disability claim, we are here to help and fight for the disability benefits you deserve. We understand that a disability can suddenly and unpredictably erase your income—but we are here and to evaluate quickly your situation.