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Long-term disability insurance vs Social Security Disability Insurance

Private disability insurance could pay out more, but you'll need to buy it before you become disabled.

If you suffer a disability and can’t work, disability insurance can help replace your income with a monthly check. Private disability insurance will likely pay a higher benefit, but you’ll need to have it before you become disabled. Social Security Disability Insurance (SSDI) allows you to apply after you suffer a disability — but qualifying for it is harder, and the benefit amount will likely be less.

What is Social Security Disability Insurance?

Social Security Disability Insurance is a government-run program that replaces part of your income if you suffer a disability and can’t work for at least 12 months. You can only apply for SSDI benefits after suffering a disability.

How does SSDI work?

Anyone who meets the requirements can apply for SSDI, although it’s designed for people with middle to lower. The Social Security Administration looks at your prior income and work history to set your benefit amount. The maximum payment amount is currently set at $2,788 per month.

Once you start receiving benefits, you’ll continue to receive them until you either recover from your disability or you hit retirement age.

What are the requirements to get SSDI?

Simply meeting the basic criteria doesn’t guarantee that you will be approved for benefits. In addition to being at least 18 years old and a legal resident of the US, you’ll need to prove that you have a solid employment history, and your disability is expected to last at least 12 months.

What is private disability insurance?

Private disability insurance is purchased from an insurance company. It offers a monthly benefit equal to a percentage of your pre-disability salary if you experience a disability and can’t work.

You’ll only be covered if you’ve bought a policy before experiencing a disability. Disability benefits may be offered through your employer or purchased individually. If you’re buying a plan on your own, your monthly premiums will be based on your occupation, age and health.

How does private disability insurance work?

How your policy works depends on which type of disability policy you choose. Insurers offer both short- and long-term disability options. Each type of policy also has its own definition of disability, like own-occupation or any-occupation.

The type of policy you buy will determine your monthly benefit amount. Short-term policies generally cover 60-80% of your pre-disability income and last up to 12 months, sometimes longer. In comparison, long-term policies cover 40-60% of your pre-disability income and can last up to retirement age.

Key features of Social Security vs. disability insurance

SSDIPrivate disability insurance
Who it’s forAnyone can apply after suffering a disabilityAnyone, but you’ll pay more if you’re unhealthy or elderly
What it coversA disability that prevents you from workingAny covered disability that prevents you from working, some plans allow you to return to work while collecting a payment
Benefit amountA percentage of your income, maxed at $2,788 as of 2020Generally replaces 40% to 80% of your pre-disability income, sometimes up to 100% with part-time earnings and benefits
Length of benefitCould last until retirement, with a 12-month waiting periodCan opt for short- and long-term policies that cover you up to retirement age

How do I compare Social Security Disability Insurance and private disability insurance?

You don’t have to choose between one or the other – you can plan to simultaneously use Social Security Disability Insurance and private disability insurance. But, your private disability insurance typically reduces your monthly payments by any amount you receive from Social Security disability.

If you can afford a private disability plan, you can typically expect a higher monthly benefit. But you’ll have to pay for premiums out of pocket each month for a benefit you may never use.

Whereas if you plan to rely on SSDI in case of a disability, know that requirements are strict and only about a third of people who apply actually get approved. And if you’re a high-income earner, your monthly benefit amount may not be enough.

Find a disability insurance policy that suits your needs

Name Product Coverage Amount Benefit period Waiting period Own Occupation Medical exam required
Policygenius Disability Insurance
$100 to $20,000
2, 5, or 10 years or until age 65 or 67
60 - 365 days
Yes
Depends on provider
Get matched with one of 15 top life insurance companies to find the best coverage and rates for you.
JRC Life Insurance
$500 to $20,000
2 year to lifetime
30 - 365 days
Yes
Yes
Compare policies up to $10 million from 45+ top insurance companies with the click of a button.
Breeze
$500 to $20,000
1, 2, 5, or 10 years or until age 65 or 67
30 - 365 days
Yes
No
Secure long-term disability insurance online by filling out an easy 10-minute application, even if you're a high income earner.
LeverageRx
$100 to $20,000+
1, 2, 5, or 10 years or until age 65 or 67
30 - 365 days
Yes
Depends on provider
Compare disability insurance for doctors on this exclusive marketplace for medical professionals.
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Compare up to 4 providers

Bottom line

Both private disability insurance and Social Security Disability Insurance can offer protection if you can’t work after experiencing a disability. Private disability insurance pays a higher monthly amount and can cover you in the short term and long term, but it can also be expensive and you’ll need to purchase it before your disability. Social Security Disability Insurance is free for anyone, but you’ll have to prove you can’t work for at least 12 months and the payout is likely going to be lower.

Before deciding on one or the other, be sure to check out the full range of options for private disability insurance by comparing disability insurance companies.

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