Is Social Security Disability Insurance enough?

Social Security Disability Insurance, or SSDI for short, is a federal program that provides income assistance for people who can’t work for a year or more because of a serious injury or illness. SSDI is a vital and invaluable program for the over 8 million Americans who receive benefits, but there are several reasons you may want to opt for private disability insurance instead.

As you can guess from the number of hits when searching for “SSDI attorney,” qualifying is notoriously difficult, and can take time. Only a third of applicants end up receiving SSDI benefits, and for those who do, the average monthly benefit in 2021 is just $1,277.

Who is eligible for SSDI benefits?

There are two different criteria for SSDI benefits, so not everyone who can’t work because of a disability will qualify. In addition to meeting the Social Security Administration’s definition of disabled, you’ll also need to be “insured.” That part isn’t automatic, even if you have a Social Security number.

Are you insured?

With individual disability income insurance like Haven Disability, you become insured by paying monthly or annual premiums. With group disability plans, those premiums are typically paid by an employer. But with SSDI, you become insured through tax deductions.

If you’ve wondered what the acronym FICA on your paystub means (and where that money goes), it stands for Federal Insurance Contributions Act. That one line item funds Social Security’s old-age benefits, survivor benefits, and disability insurance, plus the hospital insurance tax, also known as Medicare.

To become eligible for SSDI benefits, you need to have worked long enough, and recently enough, to have the minimum required work credits at the time of your disability. The number of credits required for SSDI benefits depends on your age, with younger people needing fewer credits. The requirements get pretty complicated, but the SSA site has a helpful breakdown of the number of credits needed by age if you’re curious.

Do you have a disability?

The second requirement to qualify for SSDI benefits is meeting the Social Security Administration’s definition of disability. With SSDI, that bar is higher than many individual disability insurance policies. To qualify, your illness or injury must…

• Prevent you from doing the work you did previously
• Prevent you from adjusting to a new occupation
• Be expected to last for at least one year or result in death

That second point is especially important. Many private disability insurance policies pay benefits if you’re unable to do your job, but SSDI only pays benefits if you’re unable to do any job for which you’re qualified, based on your age, education, and past experience.

The medical condition also needs to be severe enough to keep you from doing basic work activities for at least a year, such as lifting, standing, walking, sitting, or remembering.

How to apply for SSDI benefits

The Social Security Administration put together a starter kit to help you prepare for filing an SSDI claim with FAQs, a document checklist, and a worksheet to help organize your information. You can download the SSDI starter kit from their site in both English and Spanish.

Once you’re ready to file an SSDI claim, you can start the application process online at www.ssa.gov/applyfordisability/, or by phone at 1-800-772-1213. If you’re deaf or hard of hearing, the TTY number is 1-800-325-0778.

What if my SSDI claim is denied?

From 2008 to 2017, only 22% of initial SSDI applications were approved. That doesn’t mean all is lost, though. The first step is to appeal by filing a request for reconsideration, during which a different SSA employee will reevaluate your initial disability claim.

If the reconsideration is denied, the next step is a hearing before an administrative law judge, who will review the facts of the case. If you’re denied again, you’ll have the opportunity to appeal the decision to the Social Security Appeals Council, followed by a federal court review.

Despite the multiple levels of appeal, most SSDI claims end up denied. Only 2% of claims were approved during the reconsideration stage and 9% at the hearing level from 2008 to 2017. The final award rate averaged 33% during that span.

How soon will I receive SSDI benefits?

Although the injury or illness needs to last at least a year to qualify for SSDI, you don’t necessarily need to wait a year to receive benefits. You can apply for benefits as soon as you become disabled, and probably should, since the Social Security Administration says that processing an application can take from three to five months.

If your application is approved on the first try, the soonest you’ll receive benefits in most cases is the beginning of the sixth full month after your disability began. If you aren’t approved initially, the appeals process can take months, or even years. The good news is that if you do win an appeal later, you may receive past-due benefits dating back to the time you are deemed to have become eligible.

How much does SSDI pay?

The amount you’ll receive in Social Security Disability Insurance benefits is based on your lifetime earnings, so the answer won’t be the same for everyone. If your disability claim is approved, the Social Security benefit amount will be the same as your full, unreduced retirement benefit. Essentially, you just begin receiving retirement benefits early. That means the maximum monthly Social Security benefit is the same for both programs.

For 2021, the maximum monthly cash benefit is $3,148 a month, although most receive less. The average monthly SSDI cash benefit for a disabled worker was $1,277 a month as of January 2021, and $2,224 a month for disabled workers with a spouse and one or more children. The amount is unrelated to the type or severity of your disability, and when it comes to SSDI, there are no payments for partial or short term disabilities.

How SSDI compares to private disability insurance

SSDI vs. short term disability insurance

Like we mentioned earlier, the soonest you’ll receive SSDI benefits is at the six-month mark, and that’s if you’re approved immediately. It could take months or years for the appeals process to play out. That’s a long time to go without an income.

A short term disability income insurance policy can help fill the gap for SSDI applicants. Like it sounds, short term disability insurance is designed to help cover immediate needs if you’re sick or injured and can’t work. With Haven Disability, you can choose from elimination periods, or waiting periods, of 14, 30, or 60 days. An elimination period of 14 days means you’d become eligible for disability benefits after missing just two weeks of work. You can also choose benefit periods of 3, 6, or 12 months.

Short term disability insurance also typically pays a higher percentage of your salary than SSDI. Social Security is designed to replace about 40% of your income, while short term disability insurance is usually around 60%, depending on the insurer. Haven Disability offers monthly benefit options from $500 to $5,000 per month, with a maximum of 60% of your income.

If you receive disability insurance through your employer, the benefits will be taxed as income. But with an individual short term disability policy like Haven Disability, the disability benefits you receive won’t be subject to taxes. So, if your monthly benefit is $3,000 and your claim is approved, you’d receive the full $3,000. That means 60% of your income could come closer to matching your normal take home pay.

SSDI vs. long term disability insurance

While short term disability insurance can be used to complement SSDI, long term disability insurance is more of a replacement. If you meet both the medical and work credit eligibility requirements, you could rely on SSDI for long term coverage, but you may not want to.

Many private long term disability insurance policies offer own-occupation coverage, meaning you’d receive benefits if you’re unable to do your own job, rather than any job. The benefits can kick in sooner, with some long term policies offering elimination periods of 90 days. The benefits also tend to be a little higher than SSDI, with long term disability policies typically paying at least 50% of your income (and usually more).

Which one should I choose?

Whether you should get short term disability insurance, long term disability insurance, both, or neither really depends on your situation, so there is no one-size-fits-all answer. If you have several months’ income in your savings account, you may be able to forgo short term coverage. But if missing one or two paychecks would cause serious financial hardship, short term coverage might be the priority.

Want to learn more?

We’ve got you covered. Find out how much disability insurance costs, how it works, and whether disability insurance is worth the cost for you. Or if you’re ready to jump straight to a quote, we can help you there too. See your Haven Disability estimate with just 7 questions. How easy is that?