Written by Roy Law Group
If you’ve never been through a disability situation before, you might not understand the difference between long-term disability (LTD) and Social Security Disability Insurance (SSDI). 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 break down the differences between these two types of disability benefits and what you should do if you’ve been denied for them.
Social Security Disability Insurance (SSDI) is a federal program that provides assistance to people with disabilities. This is a program you have paid into since you started working but only individuals who have a disability and meet medical criteria may qualify for benefits.
Long-term disability (LTD) insurance is a benefit often provided by employers through an employee benefits program or paid for by individuals.
The purpose of both SSDI and long-term disability insurance is to provide income in a situation where you are suddenly unable to work because of a disability or disabling condition. The end-game for both programs is the same: gain financial support when you’re unable to earn a wage.
Social Security 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. This is evidenced by the fact that around 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 long-term disability approach is much more open in determining what is actually a disability condition. Most long-term disability plans will provide benefits without requiring you to be completely unable to do other forms of work.
Most long-term disability 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 function:
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.
For instance, if 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 with 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 long-term disability policy. 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.
Unlike the previous two definitions, “any occupation” coverage means that for the long-term disability policy to pay out, you must be unable to perform any job or wage earning activity. This type of coverage is very similar to SSDI requirements.
In addition to how long-term disability and SSDI differ in terms of defining a disability, they differ in terms of eligibility.
Social Security disability eligibility begins after an initial six-month “waiting period.” Meaning, if you immediately file for SSDI, the earliest you can collect Social Security disability is six months.
Generally speaking, you’re eligible for long-term disability insurance benefits after your short-term disability runs out. This is usually around three months.
Social Security Disability Insurance is not customizable. Your options are hemmed in by your own work history. You will receive a percentage of the maximum SSDI benefit based on your wage earning history and the amount of work you’ve performed over the last couple of 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. You also can’t really do anything to increase the payout in case you need the benefit at a future date.
Many long-term disability insurance plans are provided as benefits by employers. However, you can purchase long-term disability plans on your own as well.
In addition to this, there are different levels of support depending on which plan you go with. We’ve already covered three of the most common approaches to defining disability in long-term disability plans. In addition to these, there are plans that cover 60%, 70%, or even more of your pre-injury wages. Essentially, long-term disability is very customizable depending on who is paying for it.
Read more: ERISA vs. Individual Disability Insurance: What You Need to Know
Perhaps the biggest difference between long-term disability and SSDI is what happens at the point of denial of benefits.
Social Security disability
If you’re denied for Social Security benefits, the process for appeal is laid out in your denial. You can proceed immediately to appeal 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. A Social Security lawyer can help you to understand this.
Long-term disability appeals are handled entirely differently than Social Security. Long-term disability policies are usually required to provide you with an administrative appeals process. This means the first thing you should do if you disagree with their denial of your benefits is to appeal the denial with your insurance company.
Long-term disability appeals are handled entirely differently than Social Security.
Instead of taking this up with an impartial judge right away, your first step when your long-term disability claim is denied to try to convince the insurance company why it’s wrong. 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.
Appealing a long-term disability claim is a complicated and difficult process, and the system is stacked unfairly against you. That’s why you should consider getting the support of a lawyer who specializes in ERISA and long-term disability insurance, like the team at Roy Law Group.
Read more: 5 Reasons to Hire a Long-Term Disability Lawyer
We covered this a little in describing the appeals process after a denial in the last section. But for the sake of clarity, here’s what you should do if you’re denied benefits, whether it be Social Security or long-term disability benefits.
For a denied SSDI claim, you should contact an attorney who specializes in Social Security disability law. This is a very different area of law from that of long-term disability and ERISA disputes. Please note that Roy Law Group does not do SSDI law but we can refer you to lawyers who do.
If you’ve been denied long-term disability benefits, you should consider reaching out to an experienced firm like Roy Law Group. 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.
Have questions about your long-term disability claim or appeal? You don’t have to figure it out alone. Feel free to reach out to the team at Roy Law Group for help today.
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