What is the relationship between Social Security disability and long-term disability?

Sometimes you can become disablingly ill or injured. In fact, according to the Social Security Administration website, “Studies show that a 20-year-old worker has a 3 in 10 chance of becoming disabled before reaching retirement age.” Unfortunate events happen to many different people all the time, and they can keep you from working and earning money for yourself and your family. what do you do then?

There are a few different types of insurance and programs that might cover this. The Social Security Administration offers benefits to disabled people called Social Security Disability (SSD), but there are requirements for the program. You may not qualify for SSD benefits, so you may choose to purchase long-term disability (LTD) insurance on your own or through your employer, if offered.

As with health insurance, home insurance, and auto insurance, long-term disability is an insurance policy that you may choose to purchase of your own free will. Your policy may be different from others depending on the state you live in, but LTD insurance will generally pay 50%-70% of your salary, and can pay for 5-10 years or until you turn 65. Wouldn’t it be nice to receive long-term disability and Social Security disability benefits at the same time?

I would, but sadly that’s usually not the case. Your LTD may change and possibly decrease based on whether or not you were approved for SSD benefits. For example, in a hypothetical situation, if your LTD benefits were $1,000 and your SSD benefits (for which you were approved) were $800, your LTD would only pay you $200. You would essentially pay the difference of what Social Security is paying you.

This would seem to be quite unfair. Social Security is a government-funded program for which you may qualify. But your long-term disability insurance is something you actually paid for services for. Is it fair for the insurance company to change your benefits based on whether or not you were approved for a government-funded program? You would think not.

Your LTD provisions may actually require you to complete a social security disability application, because if approved, it will reduce your chances of having to pay in full. Insurance companies are still a business and they are in it to make a profit. However, if your LTD requires you to apply, you should not ignore it. Your benefits may be denied entirely if you don’t bother to apply for Social Security.

But if your long-term disability insurance doesn’t provide that requirement, you should avoid any attempts your employer or insurance company might make to encourage you to do so. They may try to refer you to services or people who will help you with the application, but whether they approve or deny you, you may be at risk of offsetting your LTD benefits.

The relationship between Social Security Disability Insurance and long-term disability insurance is complicated. SSD approval may affect and offset your LTD benefits.

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