If you are unable to work due to a medical condition and seeking disability benefits, it’s crucial to understand the distinctions between Long Term Disability Insurance (“LTD”) and Social Security Disability Insurance (“SSDI”). These two programs serve as vital sources of support for individuals facing prolonged periods of incapacity due to health issues, yet they operate independently, each with its own eligibility criteria, benefits, and application processes.
In this article, we’ll answer common questions about LTD and SSDI, including their key differences, whether you can receive both forms of benefits concurrently, and how The Maddox Firm can help you navigate long term disability insurance.
How Do Long Term Disability Insurance and Social Security Differ?
Long Term Disability Insurance and Social Security Disability have many differences. First and foremost, they are funded by different sources. LTD benefits are provided by a private or employer-sponsored insurance policy, while SSDI is a federal government program. Most people with disabilities are eligible to apply for SSDI, but you can only file an LTD claim if you receive long term disability insurance coverage, either as an employee benefit or individual coverage that you pay the premiums for.
Understanding the nuances that set LTD and SSDI apart is essential if you are seeking to secure financial stability during times of incapacity. Below we’ll explain the key differences between LTD and SSDI.
Definitions of Disability
The definition of disability for LTD insurance is typically more lenient, though it may vary depending on your specific insurance policy. However, some common characteristics include:
Own Occupation vs. Any Occupation: Many LTD policies start with an “own occupation” definition of disability. This means you are considered disabled if you cannot perform the duties of your specific job or occupation. This definition tends to be more favorable to the policyholder, as it recognizes your inability to perform your current role.
Transition to “Any Occupation”: After a specified period (typically two years), some long term disability policies may transition to an “any occupation” definition. Under this definition, you would be considered disabled if you cannot perform any occupation for which you are reasonably suited by education, training, or experience. This can be more challenging to meet than the “own occupation” definition. Some long term disability policies include an income level, stating that to be disabled, you must be unable to perform any occupation that would provide at least a certain percentage of your prior income, or "any gainful occupation."
Partial or Residual Disability: Some LTD policies also offer benefits for partial or residual disability, where you may receive partial benefits if you can work in some capacity but not at your previous level of income. As long as you still suffer a specified level of loss of income - typically 20% - you may still receive a partial long term disability benefit.
The definition of disability for SSDI is more stringent and standardized nationwide:
Inability to Perform Substantial Gainful Activity (“SGA”): To qualify for Social Security Disability, you must have a disability that prevents you from engaging in any substantial gainful activity (“SGA”). SGA is a specific income threshold determined by the Social Security Administration and is adjusted annually. In 2021, for example, the SGA limit was $1,310 per month for non-blind individuals.
Expected Duration: Your disability must be expected to last for at least 12 months or result in death.
Any Occupation: SSDI does not consider whether you can perform your previous occupation or job. Instead, it evaluates whether you can engage in any substantial gainful activity, taking into account your medical condition, age, education, and work history.
While LTD often focuses on your inability to perform your specific job or occupation, SSDI has a stricter definition centered on your capacity to engage in any substantial gainful activity. This difference in definitions can result in varying outcomes for individuals who apply for these disability benefits, with SSDI being more challenging to qualify for due to its broader “any occupation” criterion and the requirement for a longer-term disability expectation.
Benefit Duration and Amounts
The duration of LTD benefits varies based on the terms of your specific policy, which is often chosen by your employer or yourself if you purchased an individual policy. Common benefit periods for LTD can range from 2 years, 5 years, to benefits lasting until Social Security retirement age. Some policies may even offer lifetime coverage for specific conditions.
For SSDI, your benefits continue as long as you meet the SSA’s disability criteria, which typically means your disability is expected to last for at least 12 months or result in death. If your condition improves and you are no longer considered disabled, SSDI benefits may cease.
Benefit amounts between LTD and SSDI may also differ. The benefit amount for LTD is determined by the terms of your policy and can vary widely. It’s often a percentage of your pre-disability income, commonly around 60-70%. Some LTD policies may have a maximum monthly benefit cap.
On the other hand, SSDI benefit amounts are calculated based on your average lifetime earnings on which you paid Social Security payroll taxes. The formula for determining the monthly benefit can be complex, but it’s intended to provide a modest income replacement. SSDI benefits are not intended to cover the entirety of your pre-disability income but rather a portion of it, with the specific amount varying from person to person.
The actual benefit amounts and duration will depend on the terms of your specific LTD policy, your work history and earnings for SSDI, and the details of your medical condition. It’s essential to carefully review your disability insurance policy and understand the terms and conditions to determine the precise benefits you may receive under LTD, SSDI, or both.
Medical Conditions Covered
LTD and SSDI do not cover the same medical conditions in the same way. The coverage for medical conditions can differ due to the specific eligibility criteria and definitions used by each program.
The coverage of medical conditions under LTD insurance can vary depending on the terms of your specific policy. While LTD policies often provide more flexibility in terms of the specific medical conditions they cover, they usually focus on your ability to work in your own occupation or any occupation for which you are suited. LTD policies commonly cover a broad range of medical conditions that prevent you from performing the duties of your specific job or occupation. However, specific policy language and restrictions may vary.
Some LTD policies may have exclusions for certain mental health conditions, such as those related to substance abuse or self-inflicted injuries. These exclusions can affect your eligibility for benefits. Additionally, many LTD policies contain what is called a “mental illness limitation.” The mental illness limitation is a provision that sets specific restrictions on the benefits available for mental health conditions. This limitation defines the conditions under which the policy will pay benefits for disabilities resulting from mental illnesses. It may limit benefits payable for mental illness disabilities, typically to a period of two years.
Meanwhile, SSDI covers all medical conditions that meet the Social Security Administration’s criteria for disability. To qualify for SSDI, your medical condition must be severe enough to prevent you from engaging in any substantial gainful activity.
The SSA maintains a “Listing of Impairments” (commonly referred to as the Blue Book) that outlines specific medical conditions and criteria that may automatically qualify you for disability benefits if your condition meets the listed requirements. These conditions range from musculoskeletal disorders, mental disorders, neurological conditions, to various other impairments. Even if your condition is not specifically listed in the Blue Book, you can still qualify for SSDI if you can demonstrate that your condition is of equivalent severity.
It’s essential to understand that while there is overlap in the medical conditions covered by both LTD and SSDI, the focus and criteria for approval are different. LTD insurance often concentrates on your ability to perform your specific job, whereas SSDI has a broader focus on your ability to engage in any substantial gainful activity.
Claim and Appeal Processes
The claim and appeal processes for LTD and SSDI differ in several ways.
For LTD, your policy will outline the elimination period (which is essentially a “waiting period”) you must be out of work due to your condition before you can apply for benefits.
Once you’ve filed your claim, your insurance company reviews your claim to determine if you meet your policy’s definition of disability and the specific terms of your policy. The review process often involves an evaluation of your medical records, vocational information, and sometimes an independent medical examination (“IME”).
If your claim is denied, most LTD policies allow for one or more levels of appeal, which often include submitting additional medical evidence or other relevant information. The appeal process is typically handled by your insurance company itself, and you may need to go through all available appeals before considering legal action.
If your appeals are exhausted and your claim remains denied, you have the option to file a lawsuit against your insurance company in federal or state court.
SSDI includes a waiting period known as the “five-month waiting period.” This means that you are not eligible to receive SSDI benefits for the first five full calendar months after the onset of your disability. After this waiting period, you may become eligible to receive benefits.
Your claim is handled by the Social Security Administration (“SSA”). The SSA reviews your claim and evaluates your medical condition, work history, and other factors to determine if you meet the SSDI eligibility criteria. The SSA may request additional medical evaluations, including consultative exams, if necessary.
If your initial SSDI claim is denied, you can appeal the decision. The appeals process includes several levels, such as reconsideration, a hearing before an administrative law judge, and review by the Appeals Council. If your claim is denied at all appeal levels, you can file a lawsuit in federal court.
Key differences include that LTD appeals are typically handled by the insurance company itself, whereas SSDI appeals involve an administrative law judge and can include legal representation. The SSDI process can also be lengthier and more complex, with multiple appeal levels, whereas the LTD process usually has fewer levels of appeal.
Can I Collect Long Term Disability and SSDI at the Same Time?
Yes, it is possible to collect LTD benefits and SSDI benefits at the same time. These benefits can complement each other to provide financial support during a period of disability.
While both LTD and SSDI have their own eligibility criteria, meeting the requirements for one program does not automatically qualify you for the other. You will need to separately apply for and be approved for each program based on their respective criteria.
Both your insurance company and the SSA will require you to periodically update them on your medical condition, financial situation, and any changes in your disability status. Keep in mind that any other sources of income or disability benefits you receive, such as workers’ compensation, may also be factored into the coordination of these benefits.
SSDI Offsets Against LTD Benefits
An SSDI offset for LTD is a common provision in disability insurance policies that allows your insurance company to reduce the amount in LTD benefits you receive when you are also receiving SSDI benefits. This offset is designed to prevent “double-dipping” or receiving duplicative benefits, as both LTD and SSDI provide financial support for individuals with disabilities.
Here’s how the SSDI offset for LTD typically works:
Coordination of Benefits: When you have both long term disability and Social Security benefits, your insurance company will coordinate the benefits to ensure that your total disability benefits do not exceed a certain percentage of your pre-disability income. This percentage is often specified in your disability insurance policy and can vary depending on the terms of the policy.
Calculation of Offset: Your insurance company will calculate the offset amount by subtracting your SSDI benefit amount from the total LTD benefit you are entitled to under your policy. The resulting amount is the adjusted LTD benefit you will receive. Typically, yearly cost of living adjustments (COLAs) provided by the Social Security Administration do not affect the amount of offset or the amount of your net long term disability benefit.
Reduced Ongoing LTD Benefit: As a result of the offset, your LTD benefit may be significantly reduced, and it will often be adjusted to bring your total disability income, including SSDI, to the specified percentage of your pre-disability earnings.
Reporting Requirements: You are usually required to report your receipt of SSDI benefits to your insurance company, and your insurance company may periodically request updates on your disability status and any changes in your SSDI benefits.
The specific terms of the offset can vary from one policy to another, so it’s crucial to carefully review your policy to understand how the coordination of benefits works. Some disability insurance policies have more generous provisions, while others may result in a more significant reduction in benefits.
It’s important to understand the terms of your specific LTD policy and the requirements of the SSDI program to determine how they interact in your particular situation. While it is possible to receive both types of benefits simultaneously, the coordination can be complex, and the details can vary based on your policy and circumstances. Consulting with an experienced long term disability lawyer can help ensure that you maximize the benefits available to you.
Do I Need to Apply for SSDI If I Receive Long Term Disability Benefits?
Most LTD policies include a provision that requires policyholders to apply for SSDI benefits if they are eligible. This provision is known as the “Social Security Offset” or “SSDI Coordination” clause. The purpose of this provision is to coordinate and offset the LTD benefits with any SSDI benefits you may be entitled to receive. If you fail to apply for SSDI when required, your policy may allow your insurance company to reduce or even terminate your LTD benefits.
Compliance with the mandatory SSDI application provision is crucial to preserve your LTD benefits and ensure that you receive the maximum combined benefits available to you. Additionally, being approved for both LTD and SSDI can offer you several advantages that provide financial and healthcare security.
These advantages may include:
Further Evidence of Disability: The Social Security Administration's approval of SSDI benefits is very good evidence that you remain unable to perform the duties of your prior occupation or any occupation. Long term disability insurance companies are required to take an SSDI award into account when determining whether you are disabled under the provisions of your policies.
Higher Total Benefits: When approved for both SSDI and LTD benefits, you typically receive a higher total income replacement compared to having only one source of disability benefits. SSDI can supplement the LTD benefit, increasing your overall financial stability.
Financial Stability: Social Security disability benefits are generally more stable and reliable than long term disability benefits, which may be subject to policy changes or termination. Having both forms of benefits can provide a more secure financial safety net.
Medicare Eligibility: Receiving SSDI for 24 months may make you eligible for Medicare, which is a valuable healthcare coverage option.
Having both SSDI and LTD benefits can create a more comprehensive safety net, offering financial stability and healthcare coverage during your period of disability. It’s essential to understand the terms and coordination of benefits in your specific policies, and consulting with a long term disability attorney can be helpful to ensure that you receive the maximum benefits available to you.
How Can The Maddox Firm Help Me With Long Term Disability and SSDI?
Navigating receiving LTD and SSDI benefits at the same time can be very challenging. The Maddox Firm has helped hundreds of clients secure their long term disability benefits and handled the resulting SSDI offsets. Here are just some of the ways we can help you through the process:
We Help You Understand Eligibility Criteria: The experienced team at The Maddox Firm is knowledgeable about the eligibility criteria and specific requirements for both LTD and SSDI. We can examine your disability insurance policy, assess your situation, and determine whether you have a valid claim for either or both programs.
We Help Maximize Your Benefits: The Maddox Firm can navigate the complexities of coordinating LTD and SSDI benefits. We can help you understand how your LTD policy’s SSDI offset works, calculate your offset independently of your insurance company’s numbers, and ensure that you receive the maximum combined benefits available to you.
We Can Refer You to Social Security Disability Attorneys: As mentioned above, almost all LTD policies require you to apply for SSDI. We regularly refer our clients to SSDI attorneys who we can coordinate with to share medical evidence and other important documentation in order to expedite both claims processes. The Maddox Firm can refer you to a trusted SSDI attorney to handle your SSDI claim for you. We recommend that you do not use the Social Security claims vendor recommended by your long term disability insurance company.
We Represent You in Appeals and Litigation: If your long term disability claim is denied or terminated, The Maddox Firm can represent you in the appeals process and, if necessary, litigation. We will prepare a strong appeal that addresses the reasons for the denial and presents new evidence to support your claim. The Maddox Firm can also file a lawsuit against your insurance company and represent you in court.
Whether you are looking for assistance in handling your SSDI offset, navigating the claims process, appealing a claim denial, or litigating a final adverse decision, The Maddox Firm can help with your long term disability claim. Our team will examine your insurance policy, correspondence from your insurance company, medical records, and any other relevant documentation in order to give you personalized guidance on how we can help you win your long term disability claim.