If you are offered long-term disability insurance as part of your benefits package at work, you might be tempted to turn it down. Why pay for something (even if your financial contribution toward the premium is small) that you think you are unlikely to need? You may be young and healthy, and maybe you figure you can use Social Security Disability Insurance instead if you cannot work because of illness or an injury.
This logic is not necessary sound. You should seriously consider options at work for LTD coverage (and if you are self-employed, you should investigate private policies). After all, if the two programs were the same, there would be a much smaller market for LTD policies.
SSDI and LTD are both types of disability insurance, but in some ways, they are quite different and they do not provide the same safety net.
Definition of disability
LTD policies vary in what they define as a disability-triggering event if you cannot work. Many say either that you are disabled and eligible for benefits if medical problems prevent you from performing the duties of your own job or occupation. These are called “own occupation” policies, meaning you are eligible for benefits when you cannot do your own job.
Think here about the skills needed if you are a piano tuner as opposed to a worker on an assembly line. These jobs are each an honest way to earn a living, but if you are in an accident that harms your hearing, you might be unable to work as a piano tuner, but probably still could work as an assembler.
Other LTD policies say you are disabled if you cannot work in “any occupation” that is commensurate with your educational and work history. This is a harder standard to meet. In the piano tuner example, the insurance company might say that even if you can’t hear, you are still suited to do piano repair work, so you are not disabled.
SSDI, a public program earned by your payroll contributions to Social Security, has a different definition of disability. The medical or physical impairment or combination of impairments must be expected to last at least a year or result in death, and you basically must be unable to perform “substantially gainful work” in jobs existing in significant numbers the national economy considering your impairments, age, work history and education.
But it’s even more complicated than that. You can also be eligible for SSDI if you have an impairment that is on a list of conditions so serious that if you meet or equal that “listing” you are automatically deemed disabled.
The difference in the definitions of disability is only one of several issues that can vary between SSDI and LTD policies.