Understanding Disability Insurance: Coverage, Benefits, and Eligibility

Ian C. Langtree - Writer/Editor for Disabled World (DW)
Published: 2009/03/12 - Updated: 2025/06/10
Publication Type: Informative
Category Topic: Disability Insurance - Academic Publications

Page Content: Synopsis - Introduction - Main - Insights, Updates

Synopsis: This article provides a comprehensive overview of disability insurance in the USA, detailing its role as a financial safety net for individuals unable to work due to illness, injury, or psychological conditions. It explains key concepts like short-term and long-term disability benefits, Social Security Disability Insurance (SSDI), and workers' compensation, while highlighting statistics, such as one in seven workers facing a disability lasting over five years. The information is authoritative, drawing from reputable sources like the American Council of Life Insurers, and is highly useful for people with disabilities, seniors, or anyone seeking to understand income protection options. Its clear breakdown of complex insurance terms and practical guidance on obtaining policies make it a valuable resource for navigating financial planning in the face of potential disability - Disabled World (DW).

Introduction

You have read the information about the need for disability insurances, and have checked out your company benefits to find that you DO NOT have short term disability (STD) or long term disability (LTD) plan coverage. If this is your situation, read the following. The time to do so is BEFORE you need to use that insurance! The rest of you have checked out your company benefits and find that you DO have STD and LTD plans. Now you want to learn more about Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).

(Note: a denial on behalf of an insurance company for LTD does not necessarily have an impact on your ability to successfully apply and be accepted for SSDI coverage.)

Main Content

Social Security Disability Insurance

If you qualify for Social Security (i.e., if you have acquired at least 40 quarters of Social Security contributions) and are suffering from a disability, you may be able to receive monetary benefits from the Social Security Administration. Also, in some situations these disability benefits may be awarded to you and your dependents.

Social Security Disability Benefits or SSDI are paid to individuals who have worked in the recent years. Usually you have to work 5 out of the last 10 years. For individuals under 31 years old, the requirements are a little different since they have not been in the work force as long.

Under the federal Social Security Disability Act, "disability" means the "inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 12 months or result in death."

Supplemental Security Income (SSI)

The Supplemental Security Income program is funded by the general revenues of the Federal Treasury and is intended to provide a minimum level of income to persons who are aged, disabled, or blind and demonstrate economic need. The SSI program is meant to supplement any income an individual might already have to ensure a certain level of income to meet basic living expenses. The dollar amount received in SSI on a monthly basis varies from person to person and is computed each month, taking into account an individual's current financial situation.

For an individual to be eligible for SSI they must be disabled, or blind, or aged and have little or no income and resources. A person must fit into one of the following categories: Disabled, Blind (20/200 or less in your better eye with glasses or a filed of vision less than 20 degrees), or Aged (refers to be 65 years of age or older).

To be eligible for SSI a person must meet an income as well as resource test. SSI resource limits are set by statue and a person's countable or real personal property, including cash, must not exceed the specified amount to qualify. The current resource limit is $2,000 for an individual and $3,000 for a couple. Income includes earned income (which refers to monthly gross earnings), and unearned income such as Social Security Disability Insurance (SSDI) or any other type of benefit or monetary support a person receives. A standardized formula, which takes into account earned and unearned income is used by SSA to compute the dollar amount of SSI cash benefit that a person qualifies for. This formula is applied during the initial eligibility determination and an individual must qualify for some dollar amount of SSI to meet the income test.

STD is an insurance that you are usually provided by your Employer. It is an Insurance plan that pays out a certain amount of money for a short period of time (normally, no longer than 6 months). There is usually a week of what is called "qualifying" time before the STD payment will kick in. Most folks can take sick leave, vacation time, paid time off, or some other sort of time for this qualifying time. This type of disability payment is for an illness or injury of a limited period of time. An STD payment ranges from a low amount that would equate to a state's Unemployment payment, to a maximum of about 66% of base pay. To know about the specifics of your plan, ask the appropriate people for a copy of your STD plan's Summary Plan Description.

LTD, or long term disability insurance payment usually results from a physical or mental illness that prevents an employee from performing the job that they occupied at the time the illness/injury occurred. To receive the disability benefits insurance payment, the plan participant must qualify, based on the particular plan requirements. There also is a qualifying period of time for LTD, just like for STD, only the average LTD qualifying period of time is usually 6 months. Again, like STD, the payment out of an LTD plan is plan-specific, and can range from a finite dollar amount to a percentage of base pay.

Key issues to research in your LTD disability insurance plan include, but are not limited to: pre-existing conditions; "own occupation" vs "any occupation" timeframes; whether or not the monthly benefit payment is taxable or tax free; etc. (Normally, the rule of thumb is that if the company pays for the LTD plan premiums, the benefit is taxable upon receipt; if the covered person pays for the plan premiums, the benefit is tax free.) Again, for specifics about your LTD plan, check out your Summary Plan Description.

Disability and Medical Insurance Definitions

You have plans, and you have read about such things as: COBRA, OBRA, Own Occupation, Any Occupation, etc., and you REALLY want a simple definition. Well, we have them for you.

1. ACTIVE

Active medical insurance coverage means that you and/or your family are covered by a medical insurance plan. Usually, these plans are "group" plans carried by your, or your spouse's employer (in which case, you are the "covered dependent").

2. COBRA

COBRA is an acronym for "Consolidated Omnibus Budget Reconciliation Act". It refers to an active medical coverage person's ability to continue coverage as an inactive participant for 18 and, sometimes 36 months, when a "triggering event" occurs. Loss of active coverage status is a triggering event. A triggering event includes, but is not limited, to the following: loss of active coverage because the primary covered person lost his/her job (for any reason); divorce; a covered child's age exceeds that covered in the Plan. The cost of COBRA coverage is at least 100% of the Employer's cost, and can be 102% or 105%.

3. OBRA

OBRA rules allow a "qualified" disabled person to extend COBRA for an additional 11 months based on disability. There are key conditions;

• The person must be SSDI qualified
• The person must request OBRA within the first 60 (sometimes 30) days of having received the SSDI determination letter
• The Plan Administrator may charge 150% of the COBRA price for coverage

4. Medicare

When a person becomes SSDI-qualified, s/he is eligible for Medicare 24 months from the date of the first month of SSDI payment. As there is a 5-month waiting time from SSDI-qualification until the first month of payment (and this occurs the second Wednesday of the months AFTER the 5th month), the actual waiting time is 29 months.

5. HIPAA

HIPAA is an acronym for Health Insurance Portability and Accountability Act of 1996. It is a way for people who either do not choose COBRA, or who need to trigger additional health insurance before Medicare, to obtain some coverage.

6. 30-180 day Elimination Period for LTD

In most cases, a company's LTD (long term disability) plan has an elimination period of time equal to the length of the company's STD (short term disability) coverage. During this time, the employee is expected to obtain income any way s/he can.

7. Own Occupation:

To be found "disabled from your own occupation" means that you have been determined to be unable to perform the "work" that you had successfully performed prior to evidence that your illness/injury symptoms impaired your satisfactory performance of the essential duties of your job. The key here, is that the evidence must prove that your inability to successfully perform your "own occupation" must ONLY be attributed to impairment caused by the symptoms from your proven, documented, disabling illness/injury.

8. Any Occupation:

To be found "disabled from any occupation" means that, in spite of your age, level of education, and previous job history, the symptoms of your proven, documented disabling illness/injury impair you from performing work of any occupation. The reason, for LTD insurance purposes, that this impairment from performing work of any occupation is periodically reviewed, is that there are times when a person's physical capabilities can improve. Disability pay only continues as long as there is proven evidence that the symptoms impair "work". Often the "periodic review" occurs annually.

Insights, Analysis, and Developments

Author Credentials: Ian is the founder and Editor-in-Chief of Disabled World, a leading resource for news and information on disability issues. With a global perspective shaped by years of travel and lived experience, Ian is a committed proponent of the Social Model of Disability-a transformative framework developed by disabled activists in the 1970s that emphasizes dismantling societal barriers rather than focusing solely on individual impairments. His work reflects a deep commitment to disability rights, accessibility, and social inclusion. To learn more about Ian's background, expertise, and accomplishments, visit his full biography.