Studies show that a 20 year old has a 30% chance of becoming disabled before reaching retirement age. In the USA, the Social Security Administration provides disability benefits for total disabilities. You still want to get your own long term disability insurance (this can cover for partial disabilities), but here is some information on the SSA disability coverage.
To qualify for Social Security disability benefits, you must first have worked in jobs covered by Social Security. Then you must have a medical condition that meets Social Security’s definition of disability. In general, they pay monthly cash benefits to people who are unable to work for a year or more because of a disability.
Benefits usually continue until you are able to work again on a regular basis. There are also a number of special rules, called “work incentives,” that provide continued benefits and health care coverage to help you make the transition back to work.
If you are receiving Social Security disability benefits when you reach full retirement age, your disability benefits automatically convert to retirement benefits, but the amount remains the same.
Generally, you need 40 credits, 20 of which were earned in the last 10 years ending with the year you become disabled. You earn essentially 4 credit each year you work. There are reduced requirements if you are young and haven’t had a chance to earn 10 years worth of credit. So essentially you have to have worked 10 years (and 5 years in the last 10 years) paying social security tax.
The definition of disability under Social Security is different than other programs. Social Security pays only for total disability. No benefits are payable for partial disability or for short-term disability.
“Disability” under Social Security is based on your inability to work. The Social Security Administration consider you disabled under Social Security rules if:
- You cannot do work that you did before;
- We decide that you cannot adjust to other work because of your medical condition(s); and
- Your disability has lasted or is expected to last for at least one year or to result in death.
This is a strict definition of disability. Social Security program rules assume that working families have access to other resources to provide support during periods of short-term disabilities, including workers’ compensation, insurance, savings and investments.
The benefit amount is calculated based on your average annual earnings and is subject to a maximum of $2,346/month (in 2011). The average benefit payment, last month, was $1,111. Minor, dependent, children are also eligible for a small monthly payment.
In June 2012, 8.7 million people received disability benefits. Theoretically the number of recipients shouldn’t increase just because there is a recession, but they generally do increase in recessions.
There is no means testing on receiving the disability payment from the SSA. It is based on your income and disability. There are other Social Security programs (SSI, Medicare) where you must show you have very few assets before you are eligible for benefits.
Related: SSA Disability website – Personal Finance Basics: Long Term Disability Insurance – Disability Insurance is Wise (in addition to SSA disability benefits)