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Effects of Private Disability on Social Security Benefits

We live in an age of uncertainty and some people in today's world opt for different private disability insurances which can help them in difficult times. There are many financial firms in the market, which offer such insurance. Private disability insurance can help an individual to avoid any sort of financial losses, which could otherwise be caused by any sort of physical or mental disability. In general, with private disability insurance, once a disability is proved using the insurer's definitions, the insured will receive monthly insurance payments to compensate for the loss of income. The amount paid is usually a certain percentage of the person's monthly salary dependent on the amount and type of insurance purchased. This insurance is commonly known as Short Term Disability (STD) Insurance, Long Term Disability (LTD) Insurance or simply Disability Insurance. Many employers offer this type of insurance as part of their overall employee benefit plan; however, individuals can obtain individual plans through their insurance broker.

Social Security does not consider a person disabled simply because a private insurance company pays disability payments per their own definition of "disabled." Social Security will still require the individual to go through the same application and decision process as an individual who is not entitled to private disability insurance benefits.

Private Disability Insurance and SSD payments

Apart from the disability insurance payments, a disabled person can also receive funds from other sources such as Social Security Disability. The individual will continue receiving the private disability insurance payments as long as he or she follows all the insurer's rules and regulations, and their disability falls under the definition provided by the insurance company, however, most private disability insurance policies provide that when/if an individual receives Social Security Disability benefits the private disability check is REDUCED by the amount of the SSD check. This is known as an offset. For example, if a disabled individual receives $1,500 a month from his/her private insurance carrier and is entitled to $1,000 a month from SSD, the insurance carrier will reduce the monthly check to the individual to $500 while SSD pays $1,000. The individual still receives $1,500 a month just from two different entities instead of just the private insurance carrier.

Another surprise regarding the offset is that any SSD back pay may also go to reduce the private insurance monthly benefits that have already been paid to the individual. For instance, using the figures from above, if an individual receives 8 months of SSD back pay of $8,000 ($1,000 a month) and the private insurance carrier has already paid $1,500 a month for those particular months (totaling $12,000), then the private insurance carrier may require the individual to hand over the total $8,000 back pay from SSD. You must read your private disability insurance policy to determine whether your SSD benefits will offset the payments you receive from the insurer, you could also call the insurer directly to get more information about your policy and these provisions.

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