Social Security Disability Insurance is a government-sponsored program that provides financial assistance to individuals with disabilities. The program is administered by the Social Security Administration (SSA) and is funded through payroll taxes.
To be eligible for this type of insurance, an individual must have worked and paid into the Social Security system for a particular time. The amount of time an individual must have performed depends on their age. Generally, younger people will need to have worked for a shorter time than those older.
In addition to meeting the work requirement, an individual must also be considered disabled by the SSA. This means that the individual must have a physical or mental condition that prevents them from working and is expected to last for at least one year or result in death.
Top 7 Things to Know about Social Security Disability Insurance
- Social Security Disability Insurance (SSDI) is a protection that workers earn. Paying taxes throughout their lifetime will accumulate earnings, which can provide support if the person becomes disabled and unable to work. However, younger clients may not have paid enough into Social Security to be covered by disability insurance, so you should check their statements.
- According to the Social Security Act—the law that oversees SSDI—an individual is only considered disabled if they can’t work for a significant amount of time due to a medical condition. This timeframe must be at least one year, and it either needs to have already passed or there needs to be an expectation that it will last this long. There are no benefits given for partial or temporary disability.
- SSDI only pays disabled workers enough to meet their basic needs. As of April 2021, the average monthly Social Security disability benefit was $1,280. Ask your clients if they could live on that amount every month.
- Anyone can become disabled at any point in their life. Cancer, mental illness, and other severe medical conditions do not discriminate based on age. One out of every four 20-year-olds will face a disability before retiring. Therefore, you should include disability insurance in your client’s financial planning.
- Although you pay into Social Security with every paycheck, you are only covered by SSDI once you have worked and paid taxes for five out of the last ten years. If your client becomes disabled before reaching this mark, they, unfortunately, will not be able to receive any benefits.
- There is a lengthy application process for SSDI—four to six months. The SSA will request various medical records and other documentation to support the claims made in the application. Be prepared for a long and detailed process. If your client is approved for SSDI, they will automatically enroll in Medicare after 24 months.
- SSDI pays for itself. Benefits received are funded by current workers’ payroll taxes. In other words, every working American contributes to the Social Security Trust Fund, which finances SSDI.
After reading this, you should better understand Social Security Disability Insurance and how it works. Then, if you or someone you know is considering applying for SSDI, consult a financial advisor to see if it makes sense for your situation.