What’s required to qualify for disability insurance?

Almost everyone who draws a paycheck in the United States is required to pay Social Security taxes, which not only provides retirement and survivorship benefits but also provides Social Security Disability Insurance.¹ Commonly known as SSDI, this feature can provide monthly income benefits if you are unable to work due to illness or injury. But if SSDI covers employees (and the self-employed)² - and, in some cases, workers' compensation - why do many choose to supplement their coverage with individual disability insurance from a private insurer? There are many good reasons to consider doing so. So, to help you better understand the requirements for making a disability insurance claim, this article will also tell you about:

• What disability insurance is, and what it covers

• The key differences between SSDI and private disability coverage

• How to apply for and secure a private disability insurance policy

What is disability insurance?

According to the Social Security Administration (SSA), approximately one in four 20-year-olds will experience a disability for 90 days or more before they reach age 67.³ People are often surprised to learn that most disabilities are not caused by job-related accidents. In fact, back injuries, cancer, heart disease, and other illnesses cause the majority of long-term absences.⁴ Many people – from those engaged in physical labor to retail workers, medical providers, attorneys, and office-based personnel - could potentially be at risk of experiencing a disability that may compromise their ability to work – and threaten their source of income.

Disability insurance – whether SSDI or private coverage from an insurance company like Guardian – can provide financial confidence if you are unable to work due to illness or injury. These policies are designed to pay monthly benefits to help make up for lost income, helping you handle living expenses while you are unable to work. However, not all types of disability are covered by every policy. And, both the duration and the dollar amount of benefits vary from policy to policy. Before you decide to supplement your Social Security coverage with a private disability policy, it's important to get familiar with some key facts about both.

What you should know about Social Security Disability Insurance (SSDI)

SSDI is included in your Social Security benefits, and the premiums are paid for by a portion of your Social Security taxes.⁵ The program was designed to provide financial confidence should you be unable to work due to prolonged illness or injury, and in many cases, it does just that. However, even if you've paid Social Security taxes, you may not be eligible to receive SSDI benefits, and the program has a number of limitations that you should be aware of:

1. Paying Social Security taxes doesn’t automatically qualify you for coverage

You also need to have earned a sufficient number of Social Security “work credits," which are based on your total yearly wages or self-employment income. Generally speaking, you need 40 credits, and you can only earn up to four credits each year, so it typically takes ten years to become eligible for SSDI benefits. (However, in some cases, younger workers may qualify with fewer credits.)⁶

2. There’s a five-month waiting period before you can start receiving benefits

The waiting period for benefits (also called an elimination period) means that SSDI may not provide protection for shorter-term disabilities that only keep you out of work for a few weeks or months.⁷ Coverage for those types of disabilities can be provided by private short term disability insurance, which is also called STD (see below).

3. SSDI only pays benefits for prolonged or permanent disabilities that make you incapable of doing any kind of work.

If you’re a teacher, a plumber, or a brain surgeon, it doesn’t matter if a disability prevents you from working in your field – you will not qualify for SSDI benefits as long as you are physically able to hold any job, no matter how unskilled or low-paying.⁸

4. The process of getting SSDI benefits is complicated

The initial application requires extensive documentation and can take months to complete. Plus, only 30% of SSDI claims are approved, and the appeals process, should you be rejected, can take years.⁹

5. The benefit amount may not be enough to live on

If your claim is accepted, you'll start receiving payments once the elimination period is over. The average monthly benefit is $1,781.63.¹⁰ However, it's important to note that SSDI has a generous benefit period, which lasts until age 65 (unless your disability resolves itself earlier). At this point you should qualify for Social Security retirement benefits.

The bottom line is that SSDI may provide some financial protection if you have a physical or mental condition and meet the stringent criteria in the Social Security Administration's Blue Book. But even if you qualify for SSDI, the average benefit amount of $1,781.63 may not be enough for you to live on – it’s actually below the federal poverty threshold. That’s why many financial professionals say that you may not want to rely on SSDI alone for long term disability income protection, and why you may want to consider supplementing your coverage with a disability policy from an insurance company.

What you should know about private disability insurance

Many people choose to supplement their SSDI coverage with short or long-term disability coverage. A number of employers offer disability coverage as a voluntary workplace benefit. However, if you are self-employed or your employer doesn't offer this benefit, individual disability insurance is also available from providers such as Guardian.

Short-term disability insurance

Also known as STD, this coverage is for temporary disabilities not covered by SSDI or long-term disability insurance (LTD). STD plans are often provided by employers as a low- or no-cost group benefit to all employees. Features include:

1. Ease of qualification. Unlike with SSDI, a disability needn’t be long-lasting. A wide variety of injuries and medical conditions that leave you physically unable to do your job will usually qualify you to receive disability benefits. However, some issues, such as mental illness or pregnancy, may or may not be covered, depending on the plan.¹¹

2. Short waiting periods. Compared to SSDI and long-term disability plans, the waiting period for disability benefits is much shorter – typically two weeks.¹²

3. Generous benefits. While STD payments don't replace all your wages, the benefit is often much higher than SSDI and can equal 40% to 70% of your income.¹³

4. Short benefit period. Payments last for a shorter period of time than SSDI or LTD, with a benefit period typically lasting 3-6 months, or until you can get back to work (whatever comes sooner).¹⁴

5. You must file a claim. Short term disability benefits don’t come automatically – like other kinds of disability benefits, you have to file a claim. The insurance company will need to see medical records or other evidence that you have a disabling condition. If you have coverage through work, your first step should be to contact HR.¹⁵

It’s important to note that even with the most generous plan, STD benefits almost never last for more than a year.¹⁶ For longer-lasting disability protection, you will need a long-term plan.

Long-term disability insurance

Also known as LTD, these plans cover the same kinds of long-lasting disabilities as SSDI. But with a private LTD policy, it is often easier to qualify for benefits, and the benefit amount may be much more generous, depending on the policy and circumstances of your illness or injury. Here’s what you should know:

1. Cost. You can expect to pay anywhere from 1% to 3% of your annual income for a comprehensive long term disability plan.¹⁷ That may sound like a lot, but put in context; long-term disability insurance cost is lower than the Social Security self-employed tax rate of 12.4%.

2. Flexible waiting periods. The time you have to wait for benefits to begin can be longer or shorter than SSDI, depending on the specific policy: a longer period will tend to lower premiums, and a shorter period will raise them.^18,19

3. Generous benefits. In a properly designed long term disability plan, the benefit amount should replace about 60% of your gross income, but since it is usually paid tax-free the amount may be quite close to your “take home” pay.²⁰

4. Flexible benefit periods. A private long term disability policy can have a benefit period as short as two years – or it can go all the way to retirement age (or until you recover). Of course, the longer the benefit period, the more expensive the policy.²¹

5. The definition of disability matters. Some policies have an "own-occupation" definition of disability, which pays benefits if you can't perform your own occupation. This can be essential to professionals with specialized skills – doctors, dentists, lawyers, and so on. Other policies have an "any-occupation" definition of disability, which only pays benefits if you can't do any work.^22,23

6. You must file a claim. LTD benefits don’t come automatically – like other kinds of disability benefits, you have to file a claim. The insurance company will need to see medical records or other evidence that you have a disabling condition.

While LTD claims process is more involved than that for STD, it is generally simpler than for SSDI. Importantly, you can often qualify for benefits even if your disability isn’t severe enough to meet Social Security Administration Blue Book requirements, and the benefit payments can be significantly higher than SSDI limits. Is disability insurance worth it? The answer will ultimately depend on your individual financial circumstances and concerns about financial security.

How can you get disability insurance?

Short-term policies are often included as part of an employee benefits package, and many employers pay for at least a portion of the cost. If it's available, it's a good idea to sign up because individual plans can be hard to get and relatively costly. Some organizations also offer voluntary LTD plans. These can be a cost-effective source of financial protection with group rates, and some employers may also cover a portion of the cost.

If coverage isn't available at work and you're concerned that SSDI may not provide adequate financial protection, consider speaking with a financial professional about getting a comprehensive or supplemental long term disability policy. If you don't know a professional who can help you get disability insurance, Guardian can put you in touch with someone who can listen to your needs, discuss available options, and help you get the protection you want for you and your family members. Here's how to find someone near you:

Why choose Guardian for disability insurance?

Investopedia named Guardian the Best Overall Disability Insurance Company for 2023 because of our wide range of plans and options to meet the needs of individuals and businesses.²⁴ And the fact is, we have more experience than most: Guardian has been helping families protect their financial well-being for over 160 years. With high scores for financial soundness from independent rating agencies,* our 12 million customers can trust us to be there when they need us most.²⁵

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