Many people take their ability to work and earn money for granted,Individuals who find themselves having to leave the workforce for an extended period, perhaps permanently, due to a disability have relatively limited options for making up the loss of their earned income. Two of the most well-known and widely-used of these options for workers in the United States are long-term disability insurance (LTD) and Social Security Disability Insurance (SSDI). The similarities between private disability versus Social Security benefits can often lead individuals trying to prepare for their futures uncertain about LTD vs. SSDI choice factors. Because SSDI benefits are available to everyone who meets the government criteria – meaning there is no special step an individual must take, prior to becoming disabled – choosing between LTD and SSDI coverage is most often a question of choosing whether to trust that SSDI benefits will be sufficient to make up for loss of income in the event of future disability. There are general guidelines you may find helpful to keep in mind, but the decision that makes the most sense for your situation will likely depend on numerous factors.
Understanding Long-Term Disability Insurance vs. Social Security Disability
As is usual with disability insurance, the answers to the questions arising from this uncertainty can be complicated. Generally speaking, however, one of the most important steps one can take toward informed decisions about choosing between LTD and SSDI coverage will be to develop a thorough understanding of how private disability versus Social Security benefits work, and particularly of the areas in which they share significant overlap vs. those in which they diverge.
What Is LTD?
Long-term disability insurance, which industry professionals often call simply “LTD,” is a form of insurance sold on the private (as distinct from “public,” i.e. government-managed) market. These LTD plans can be divided into sub-categories according to a number of criteria. One conceptual division with considerable practical significance is that between employer-sponsored vs. individually purchased long-term disability insurance policies.
Employer-Sponsored LTD
Often LTD plans are offered by employers as part of their employee benefit packages, in a manner similar to that commonly used in the United States for employee health insurance.
Individually Purchased LTD Policies
Long-term disability insurance sold directly to individuals, rather than through the intermediary of a workplace human resources (HR) department or employee benefits coordinator, are not subject to the same standards that apply to employer-sponsored plans. One implication of this distinction for consumers is that, while you are generally free to select any direct-purchase LTD policy for which you qualify under the insurer’s guidelines, you may need to take special care to review all of the policy terms before committing. The responsibility is on you to make sure that the policy offers the benefits you may need, and to understand your rights and procedures for appeal in case of a future claim denial.
What Is SSDI?
Unlike either employer-sponsored or individually-purchased LTD plans, Social Security Disability Insurance is a government-funded program, managed through the United States Social Security Administration (SSA). The SSA sets SSDI eligibility requirements and establishes review procedures for evaluating both initial claims and appeals of initial claim denials.
Social Security disability denials are common, affecting more than 75% of initial applications, so the appeals process for SSDI has a substantial impact on the individual experience of applying for disability benefits in many cases. By contrast to some other federal aid programs, such as Medicaid, the application process for SSDI, the requirements for eligibility, and the benefits available for those who qualify will generally be the same regardless of the state in which a claim is filed.
Assessing Major Differences Between Private Disability Versus Social Security Benefits
Thanks to the centralized nature of the federal program, SSDI offers essentially similar benefits to all qualifying individuals, subject to certain adjustments based on work history. The work history requirements, at base level, also apply across the board. The SSA explains that SSDI benefits are typically available only to individuals who have worked for at least five out of the 10 years preceding their application for benefits, although the five years worked need not have been consecutive. There are no distinct plans or policies within the SSDI program, which helps to ensure consistency across all Social Security disability applications and recipients.
Unfortunately, this also means that there is essentially no individual flexibility or customizability. SSDI operates on a one-size-fits all system, with the limited caveats that blindness qualifies for greater monthly financial benefits than most other disabilities. Also, individuals with a diagnosis on the SSA’s list of presumptively qualifying conditions may face a less complicated application process compared to those for whom the disabling nature of their condition must be proven through a series of documented medical assessments.
Long-term disability insurance plans, by contrast, are more varied. Different employers negotiate terms with long-term disability insurance providers to get competitive group options for their employees. Often, employees have the opportunity to choose from among a few employer-sponsored options, with the employee’s own contributions toward the plan deducted from his or her weekly or monthly pay. Within those federal guidelines there can often be significant room for variability regarding such factors as the percentage of income the policy will replace, the period over which the policy will cover payments, and the conditions that qualify for disability benefits, as well as how the validity of claims will be determined.
Individual policies purchased directly from insurers can offer an even wider range of variation, which means an increased customizability in terms of consumer choice, but typically also reduced “bargaining power” for the individual, in terms of securing a competitive rate for the policy premiums, which can be substantial.
Choosing Between LTD and SSDI Coverage: Evaluating the Options
Many LTD plans require policy holders to file for SSDI before attempting to claim benefits through their private disability insurance. For these individuals, LTD vs. SSDI choice factors are likely to relate less to the advantages of one program over the other than to whether relying solely on SSDI in the event that they are forced to leave the workforce due to serious illness or injury. They may instead face challenges in coordinating long-term disability benefits with Social Security. Broadly speaking, there are three main reasons why individuals might wish to sign up for private disability, despite the sometimes steep cost of premiums:
- Definitions of disability: The SSA’s definition of disability requires an applicant to be completely unable to engage in “substantial gainful activity” in order to qualify for SSDI benefits. Some private LTD plans may have less restrictive requirements, or apply higher activity thresholds, in their determinations of whether an individual is disabled. This can be especially true for “own occupation” plans, which may offer benefits if an individual is unable to continue in his or her former occupation, even though the person carries on “substantial gainful activity” at a significantly reduced capacity, or in a less-demanding profession.
- Work history requirements: LTD plans will not usually cover pre-existing conditions, while SSDI eligibility does not necessarily distinguish between conditions newly developed vs. those that have worsened over time. However, total benefits for SSDI are linked to the recipient’s lifetime work history, which is the amount he or she has paid into Social Security over time. LTD plans may have an exclusion window or “look-back” period, meaning that any benefits may not become available for a few months to a few years after the individual signs onto the plan. Generally speaking, the number of years he or she worked prior to taking out the policy will not typically matter to the total benefits available, or to the determination of eligibility. This difference from SSDI can be enormously important to individuals with limited work histories.
- Percentage of income: SSDI’s benefits calculations do not necessarily calibrate monthly payments as a percentage of the income the recipient earned while employed, either in the occupation in which the person was engaged when they became disabled or as an average of wages earned over the course of their time in the workforce. Average monthly SSDI payment per recipient was $1,751.23 as late as April 2025 – a daunting figure for most household budgets. For private disability insurance, on the other hand, at Fields Law Firm we commonly see policies paying as much as 70% of the income the policy holder was earning prior to becoming disabled. For high-earning individuals, especially, the stark difference in amounts paid can be a compelling argument in favor of securing an LTD plan, either through an employer-sponsored plan or via the consumer marketplace.
Making The Right Decision For You
Ultimately, whether long-term disability insurance, Social Security Disability Insurance, or a combination of both makes the most sense will depend on your unique circumstances, including your current income, your health, your work history, and your tolerance for risk. While SSDI provides a government-administered safety net for workers who become disabled, its strict eligibility requirements, limited benefits, and often lengthy application process can leave significant gaps in financial security. By contrast, private long-term disability insurance can offer more robust income replacement and flexibility in how disability is defined, though it comes at the cost of higher premiums and requires careful review of policy terms. Individuals considering these options should take the time to evaluate the details of any private plan, understand how it coordinates with SSDI, and seek professional guidance if needed to ensure that their coverage will truly meet their needs in the event of a serious illness or injury.
