Long-Term Disability Benefits vs. Social Security Disability Benefits, and How They Affect One Another

A serious injury or illness prevents you from going to work. You are losing wages, but the expenses have not changed. Your recovery may be taking months longer than expected, or your condition may be permanent. Regardless, you need help and are considering applying for long-term and/or social security disability benefits. Though this may appear to be a simple solution, there are important facts to know before continuing down this path.

Let our experienced Kansas City long-term disability attorney help you with the process of filing a disability claim.  Call our office today at 816-203-0143, for a free case review. We handle disability cases throughout Missouri and Kansas and can answer questions about personal injury claims involving disability benefits.

Long-Term Disability vs. Social Security Disability

Long-term disability benefits are typically offered by employers to employees through a group plan. These private group disability plans are sold by an insurance company to the employer. If a worker becomes injured or unable to work, long-term disability benefits pay back a percentage of their lost wages. To qualify, you must meet the definition of disability under the plan purchased by your employer from the private insurance company.

By contrast, Social Security disability is a government-sponsored disability program. To receive Social Security disability, you must meet certain work credit requirements and the definition of “disability” under the federal laws and regulations.

Long-Term Disability May Require You to Apply for SSD

Most LTD plans require the employee to file a claim for Social Security disability. Many LTD insurance companies require this even if the employee would not qualify for SSDI. The reason is the insurance company wants to reduce the benefits paid to the employee under the terms of the LTD plan.

Approval for Social Security disability can take a year or longer. A mandatory five-month waiting period must also pass from the initial onset of the long-term disability. A payment would not be received until the sixth month at the earliest, but the approval process usually takes longer.

Since approval for Social Security disability can take more than a year, a beneficiary is usually given a retroactive, lump sum award at the time of approval. Retroactive awards compensate you for periods of benefits that were not previously paid. Depending on the amount of time at issue, these retroactive disability awards can amount to considerable sums.

Does Your Long-Term Disability Policy Have an “Offsetting Clause?”

It may be tempting to spend your Social Security disability insurance immediately. However, this can be a big mistake. Long-term disability plans often contain an “Offsetting Clause”. This clause states that, if you receive benefits for your disability from some other source, the amount of your long-term disability benefits is reduced by that amount. This reduction is called “offsetting.” If you receive a retroactive award from Social Security, this additional income may offset and reduce your long-term disability benefits.

For example, say your LTD benefits plan pays you $2,500 a month. The same program requires you to apply for Social Security disability, which ends up granting you an additional $1000 a month. 

If your LTD policy contains an offsetting clause, the LTD insurance company would offset the Social Security disability benefits and reduce your LTD benefits to $1500 each month.