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What’s the Difference Between Long Term Disability & Social Security Disability?

If you’ve never been through a disability situation before you might not understand the difference between Social Security Disability (SSDI) and Long Term Disability (LTD) insurance.  And if you’ve been recently denied for one or both of these, you might not know what your next steps should be.  We’re going to use this article to break down the differences between the two types of disability benefits and what you should do if you’ve been denied for them.  

 

A Brief Synopsis of SSDI & Long Term Disability

Social Security Disability Insurance (SSDI) is a program you have paid into since you started working.  Whereas long term disability (LTD) insurance is a benefit often provided by employers, or paid for by individuals.  The purpose of both Long Term Disability insurance and Social Security disability is to provide income in a situation where you are suddenly unable to work because of a disability, or disabling condition.   The end-game on both programs is the same: financial support when you’re unable to earn a wage.

Difference #1: Defining Disability 

Social Security requires demonstrating total disability.  This may seem straight forward, but there is a lot of contradicting opinions on how to apply this definition, and that is evidenced by the fact that ~70% of initial claims for Social Security disability are denied outright. The litmus test Social Security uses does not take a condition that stops you from being able to do your job and consider that, in itself, disabling. Instead, Social Security looks at your total skill set and seeks to determine if the disabling condition stops you from being able to do any other job in a normal economy.

Long Term Disability takes a whole different approach to defining disability.  In many ways the LTD approach is much more open in determining what actually is a disability  condition.  Most LTD plans will provide benefits without requiring you to be completely unable to do other forms of work.

To clear this up a little we can look at the three most common types of long term disability insurance coverage and compare how they fucntion.

 

“Own Occupation” Coverage

A Long Term Disability Policy with own occupation coverage provides benefits for a disabling condition that prevents the policy holder from performing the activities and functions of their current job-role.

This definition/requirement is far more permissive than Social Security’s disability definition.  If for instance you are a mechanic and you hurt your hands, you might not be able to perform the job role of being a mechanic anymore.  Even though you might be able to answer phones, or do some other work requiring less dexterity.  You are disabled from performing your “own occupation” under this type of coverage.

 

Own Occupation Coverage” w/ Time Limits

An Own Occupation policy can have time limits.  This means that you, as the policy holder, would be able to collect benefits for a disabling condition that stopped you from performing your occupation at the time of your disability, but only for a time.  After that period, often at least a year, the standard for your definition of disability changes from “own occupation” to “any occupation.”

When this change of definition occurs, as spelled out in the policy, you must either be unable to perform any occupation, or you can lose the benefit from your LTD plan.  So, if you’re the mechanic with the broken hands (from the example above), when the time limit expires on your “own occupation” coverage, you will be assessed on whether you can answer phones or do other wage earning activity.

 

“Any Occupation” Coverage:

Unlike the previous two definitions, Any Occupation Coverage, means that for the Long Term Disability (LTD) policy to pay out you must be unable to perform any job or wage earning activity.  This type of coverage is very similar to the requirements of Social Security Disability (SSDI).

 

Difference #2: Implementation

In addition to how LTD and SSDI differ in terms of defining a disability, they differ in terms of time to implementation.  Generally speaking, Long Term Disability insurance begins after your short term disability runs out.  This is usually around three months.

In contrast, Social Security disability eligibility begins after an initial 6 month “waiting period.”  Meaning, if you immediately file for SSDI, the earliest you can collect Social Security disability is 6 months.

 

Difference #3: Options

Many long term disability insurance plans are provided as benefits by employers.  However, you can purchase LTD plans on your own as well.  In addition to this, there are different levels of support depending on which plan you go with.  We covered above three of the most common approaches to defining disability in LTD plans.  In addition to these, there are plans that cover 60%, 70%, or even more of your pre-injury wages.  Essentially, LTD is very customizable depending on who is paying for it.

Social Security Disability (SSDI) is not customizable.  Your options are hemmed in by your own work history.  You will receive a percentage of the maximum SSDI benefit based upon your wage earning history and the amount of work you’ve performed over the last couple years.  If you qualify for SSDI (which is not guaranteed because this is usually a higher bar than qualifying for LTD) you don’t get a choice on your payout, and you can’t really do anything to increase the payout incase you need the benefit at a future date.

If you’re curious about how much you might make on SSDI, check this out.

 

Difference #4: Denials

Perhaps the biggest difference between the two types of disability insurance we’re discussing (LTD & SSDI) is what happens at a denial.

If you’re denied for Social Security (SSDI), the process for appeal is laid out in your denial.  You can proceed immediately to appealing an unfavorable decision.  You have a limited time to file an appeal of your claim, but there are a number of great attorneys that can help you with this.  Your appeal will be handled by a judge employed by the Social Security Administration, but they will be administering the law as defined in federal code and the path of appeal is straight forward.  Your Social Security lawyer can help you understand this.

Long Term Disability Appeals are handled entirely different than Social Security disability appeals.  LTD policies are usually required to provide you an administrative appeals process.  This means, the first thing you should do if you disagree with their denial of your benefits, after contacting a disability insurance attorney like Roy Law, is to appeal your denial to the company that denied you.

That’s already somewhat of a confusing and uncomfortable situation.  Instead of taking this up with an impartial judge, your first step (or maybe two steps) is to try to convince the company that just denied you (an insurance company) that they were wrong in denying you.  It’s only after you’ve exhausted the administrative appeal process that you can potentially file a lawsuit against the insurance company in a federal court.

 

Difference #5: What You Should Do When Denied

We covered this a little in describing the appeals process after a denial in the last section.  But for the sake of clarity, we’re going to cover this separately.

For a denied Social Security disability claim (SSDI) you should contact a Social Security disability attorney.  These are attorneys that specialize in Social Security disability law, which is very different than the law that governs most Long Term Disability (LTD) disputes (ERISA).

If you’ve been denied for a Long Term Disability (LTD) claim, you should reach out to an experienced firm like Roy Law.  Even at the administrative appeal level it is essential that you pursue a number of angles that may eventually end up helping you should you need to file a lawsuit later on.  A great ERISA attorney will help you with this.

 

About the Author
In 1998, Chris obtained his law degree from the University of Oregon, and in 1999, he accepted his first job as an attorney with the Washington State Attorney General’s Office. In 2000, Chris entered a private litigation practice in Vancouver, Washington. In private practice, Chris litigated a variety matters including administrative, criminal, real estate, construction, business, and insurance.