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Social Security Disability and Private Disability Insurance

Social Security Disability and Private Disability Insurance

When you become disabled and can no longer work, you may become worried about how to live without income. Many people wonder whether Social Security disability benefits or private disability insurance are options to supplement the lost income and whether you can collect both kinds of benefits if you qualify for them.

Although the Social Security disability program is well-known, the benefits provided through Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) frequently do not pay out enough money to live on, so you probably need to explore additional options.

You can collect disability benefits through Social Security, a private insurance policy, and workers’ compensation simultaneously. Additionally, some states, including New York, offer temporary disability benefits through their unemployment insurance programs. And you may be entitled to receive veterans benefits, depending on the nature of your disability. If you qualify for more than one of these benefits programs, however, you will likely not be entitled to the full benefit of each one of them.

For example, if you are entitled to disability and workers’ compensation benefits, the combination of benefits cannot exceed 80% of your average wages before you became disabled. In this case, your Social Security disability benefits will be reduced to meet the 80% threshold. If you are still receiving Social Security disability benefits when your workers’ compensation benefits run out, you can resume receiving the full benefit of your Social Security disability.

Private disability programs are offered as part of an employer’s benefits package or paid for by an individual through monthly premiums, and they are administered by large commercial insurance companies. Approximately 30% of workers in the United States have disability insurance provided through work, and they are popular policies because their definition of disability is broader than Social Security’s, and the benefits often replace a greater percentage of your lost income than Social Security would.

There are a number of key differences between private disability insurance and disability benefits through Social Security. Unlike Social Security disability, which requires you to be totally disabled, private insurance companies will allow partial disability coverage. Social Security does not have limitations on how long you can receive payments, but most private insurance companies cap your benefits, and when you reach their limit, your benefits cease automatically.

If you have private disability insurance, it will not disqualify you from getting approved for Social Security disability benefits, and, unlike with other concurrent benefits, Social Security disability amounts will not be reduced in case you receive both. Many private insurance companies, however, will reduce your private disability benefit payment so that your total monthly income stays at the level it was before you became disabled.