Private Disability Insurance vs. Social Security Disability Insurance (SSDI)

Private disability insurance and Social Security disability insurance (SSDI) are both potential sources of income if you sustain a disability that prevents you from working. Disability insurance can help lessen the economic hardship you face when you can't work due to a disabling impairment.

SSDI can give you important protections if you've contributed to Social Security for long enough. But eligibility for SSDI benefits requires meeting a strict definition of “total disability." In many situations, private disability insurance may offer more liberal coverage and benefits.

This article discusses the basics of Social Security disability insurance (SSDI) and private disability insurance. It also addresses scenarios where you might receive both disability benefits.

Social Security Disability Benefits

Social Security disability insurance (SSDI) covers 150 million workers. Over 8 million people are 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 $1,537 in monthly benefits.

To qualify for SSDI benefits, you must show you meet the Social Security Administration's (SSA) strict definition of disability. You must show:

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

If you're only partially or temporarily disabled, you can't receive SSDI benefits. Further, when you do qualify, there's a waiting period. Social Security can't pay out benefits until you've 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 to receive benefits. The Social Security Administration is also responsible for administering Supplement Security Income (SSI) benefits. SSI benefits offer financial support if you're a low-income disabled person. SSI benefits aren't dependent on your work history.

Private Disability Insurance

If you're fortunate, you're among the 30% of workers who have disability insurance provided through their work. But you can also purchase a private disability insurance policy to protect you against unforeseen loss of income or to supplement other insurance plans. The terms of insurance policies can vary significantly from plan to plan. Private disability insurance can offer significant advantages over SSDI.

One of the greatest benefits of private disability plans is their more expansive definitions of disability. Remember that SSDI requires showing total disability. In contrast, many private plans will pay benefits without requiring you to prove that you can't work at all.

Definitions of what constitutes a disability vary from plan to plan. Below are the three most common definitions:

• “Own occupation" coverage insures you against disabilities preventing you from performing the duties of your occupation.
• “Own occupation" coverage with time limits insures you when you can't perform your occupational duties for a limited time. These policies usually include a "change in definition" feature under which the standard moves from "own occupation" to "any occupation" after a certain amount of time. This is most commonly after one, two, or five years.
• "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.

Suppose you're a surgeon, and you injure your hands. Under the first two of the above definitions, you'd be considered disabled, at least for a period of time. You'll be able to receive benefits to replace your lost income without having to prove that you can do no work whatsoever.

Another advantage of private disability insurance is that it might replace a greater portion of your lost income than SSDI will. SSDI benefits are based on your average lifetime earnings and, as of 2023, can't exceed $3,627 per month. If you have private insurance, you may be able to receive more than this amount. Many policies cover around 70% of your salary at the time your disability arises.

Receiving Multiple Types of Disability Benefit Payments

Fortunately, it's possible to receive multiple forms of disability benefits at once. When comparing private disability insurance versus SSDI benefits, you don't have to take one or the other.

If you qualify for SSDI, you can receive Social Security and private disability insurance benefits. Indeed, many insurers will require that you apply for SSDI. But insurers may deduct your Social Security disability payments from your private benefits.

If you qualify, you may also receive workers' compensation benefits or military benefits for veterans while receiving private disability and SSDI benefits.

Contact a Disability Attorney for Legal Advice on Your SSDI or Private Disability Insurance Claim

Perhaps you're considering how to protect yourself from a serious injury or disabling condition. Or maybe you believe you're currently entitled to benefits due to a personal injury. Contact a disability lawyer to discuss your options for pursuing a disability claim. An attorney can also help you navigate your claim with your insurance company.