Disability insurance is used to prevent the financial loss caused by a disability. Workers who qualify for disability benefits receive a percentage of their monthly salary from the insurance company. A disabled worker may also be drawing income from Social Security, pension plans, and other wages. These other sources of income will not reduce private disability payments, as long as the worker meets the insurance plan's definition of disability.
Social Security disability payments will not reduce your private disability benefits. This is true for both short-term and long-term disability plans. The disability insurance you purchased was a private contract between you and the insurance company. Government benefits will not impact that contract. Disability payments from a private insurance plan will also have no reduction on Social Security disability payments. Both plans will pay you their full required amount, as long as you meet their conditions of disability.
Some long-term disabilities may last into retirement, and for life. If you purchased a disability plan with a benefit period until age 65 or for life, you will still be receiving disability payments when you switch over to Social Security retirement payments. Social Security retirement benefits will not reduce private disability payments, as the latter are from a private contract with the insurance company. Disability payments do not lower Social Security retirement payments, because they are not considered wages.
Worker's Comp and Pensions
A disabled worker may also be receiving payments from worker's compensation, or from a pension. These payments will not impact benefits from a private disability plan. Outside payments from a worker's compensation program or from a pension are not part of a disability contract signed with an insurance company. As long as you meet the agreed condition of disability, no other payments can reduce your private benefits.
A disabled worker may be unable to perform his own job, but still may be able to work in another position. Wages from another job will reduce private disability payments only if by working, the insured no longer meets the contract's definition of disability. Own-occupation disability allows for a person to work in another field and receive disability payments as long as he can no longer perform his old job. An any-occupation disability plan would not allow a person to earn any other wages and keep receiving benefits.
- "Fundamentals of Insurance Planning"; Burton Beam, et al.; 2009
- Social Security Online: How Workers' Compensation And Other Disability Payments May Affect Your Benefits
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