One benefit that is becoming increasingly common for employers to offer is a long-term disability policy.
These policies are private plans that are separate from Social Security, with their own premiums taken out of your paycheck.
The upside of long-term disability is that it is often easier and quicker to be approved for it than Social Security disability.
However, it’s important to understand that these two types of disability often intersect and offset each other.
Many, if not all, long-term disability policies have language in them that will require you to apply for Social Security disability benefits if you are receiving long-term disability.
Whether or not you are actually approved for benefits by Social Security often does not impact whether you can continue to receive long-term disability, but insurance companies like to include this clause to reduce what they have to pay out.
That’s because another common section in these long-term disability policies allows for an offset of benefits, meaning that the insurance company can reduce their monthly payment to you by whatever amount Social Security pays you once you’re approved.
So, let’s say you stop working and the insurer starts paying you $2,000 a month in long-term disability benefits. The policy requires you to seek Social Security disability benefits. You’re approved, and being receiving a monthly benefit of $1,500.
In that situation, the insurer will then only pay you $500 per month in long-term disability benefits while you will receive $1,500 each month from Social Security. Your monthly total will remain the same, the money just comes from different places.
There is, however, quite a bit of difference in how exactly the these policies are written, so it’s important to look them over regularly, and consult with your insurer or an attorney if you have any questions.