Having private Disability Insurance can potentially impact your eligibility for Social Security disability benefits. The main factor to consider is whether your private policy is categorized as a short-term disability (STD) or a long-term disability (LTD) insurance.
If you have STD insurance, it generally does not affect your eligibility for Social Security disability benefits. STD insurance typically provides coverage for a shorter duration, usually up to six months, and is designed to bridge the gap between the onset of a disability and the potential eligibility for LTD insurance or other long-term benefits.
On the other hand, if you have LTD insurance, it can impact your Social Security disability benefits. LTD insurance provides coverage for an extended period, often until retirement age, and may coordinate with Social Security disability benefits. Coordination means that the LTD insurance benefits are reduced by the amount of Social Security disability benefits you receive.
It's important to note that the total combined benefits from your private LTD insurance and Social Security disability benefits cannot exceed a certain percentage of your pre-disability earnings. This is known as the 'maximum allowable benefit' or 'offset limit.' If your combined benefits exceed this limit, your LTD insurance benefits may be reduced.
It is advisable to review your private Disability Insurance policy and consult with an insurance specialist or Social Security representative to understand how your specific policy may interact with Social Security disability benefits. They can provide guidance on the coordination of benefits and any potential impact on your eligibility or benefit amounts.