What is the difference between SSI, SSDI, and individual disability insurance?

People in good health don't always consider the possibility that, at some point, they may suffer a disability that affects their ability to work -- and leaves them without the income they need to live on. But it's important to note that the Social Security Administration (SSA) estimates that one in four 20-year-olds will experience a disability for 90 days or more before they reach age 67.¹

This is why everyone – especially those with dependents who rely on their income – should have a basic understanding of the disability programs and income protection options available to them. Here, we’ll help you understand what disability insurance covers and why it differs from health insurance. We'll also discuss three key sources of potential protection for your income: Two government-sponsored programs - SSDI and SSI (Social Security Disability Insurance and Supplemental Security Income) - and private (or individual) disability insurance from an insurance company. You’ll learn about:

• How SSDI, SSI, and private disability insurance work

• Eligibility requirements for the two government programs – SSDI and SSI

• The benefits and drawbacks of individually-owned (individual) disability insurance

• Where and how to get an individual disability insurance policy

What is Supplemental Security Income (SSI)?

SSI is a government-sponsored disability program that provides monthly payments to people with disabilities and older adults who have limited income and little or no financial resources. It is designed to help recipients cover basic needs, including food, clothing and shelter. While many people confuse the two, it's important to note that it is not the same as SSDI. Here are some key facts:

• SSI (and SSDI) are not a form of health insurance: These programs are designed to help provide income protection.

• Unlike SSDI, SSI eligibility and benefits are not based on one’s Social Security contributions or work history: This is perhaps the key difference between SSI and disability insurance. While SSDI eligibility requires you to have contributed to Social Security and accumulated the required number of work credits, SSI is an entitlement program with no work-related requirements.

• SSI benefits are available to both children and adults who meet the eligibility criteria: Adults and children may be eligible for SSI benefits if they have little or no monthly income, little or no resources, a disability, blindness, or are aged 65 or older. Those under age 65 must have a disability that affects their ability to work for a year or more, or will result in death, or – in the case of children – severely limits daily activity.

• SSI benefits are generally lower than SSDI benefits: As of 2024, the full Federal Benefit Rate (FBR) for SSI recipients was $943 per month for an individual and $1,415 per month for a couple.² In 2023, the average SSDI payment was $1,489 per month, and the maximum SSDI payment was $3,627 per month.³

• SSI has criteria relating to income and financial resources: SSI is generally for individuals who don’t earn more than $1,913 from work each month. In addition, individuals must have less than $2,000 in assets and couples must have less than $3,000 in assets to qualify. If a parent or parents are applying for a child, these limits increase by $2,000.⁴

For additional details and information on how to apply for SSI, please go to the Social Security website.

What is Social Security Disability Insurance (SSDI)?

SSDI is a government-sponsored disability insurance program that is included in your Social Security benefits, so the premiums are paid for by a portion of your FICA (Federal Insurance Contributions Act) withholdings. Here are some key facts that you should be aware of:

• Paying Social Security taxes doesn’t automatically qualify you for coverage: You also need to have earned a sufficient number of Social Security work credits, which are based on your total yearly wages or self-employment income. Generally speaking, you need 40 credits, 20 of which were earned in the last 10 years before you become disabled. Since you can only earn up to four credits each year, it typically takes at least 10 years to become eligible for SSDI benefits. (However, younger workers may qualify with fewer credits.)

• There is a five-month elimination period (waiting period) before you can start receiving benefits: The waiting period for benefits also means that SSDI may not provide protection for shorter-term disabilities that keep you out of work for a few weeks or months. That coverage can be provided by short term disability insurance (STD) from a private insurance company.

• SSDI only pays benefits for long-lasting or permanent medical issues that make you incapable of doing any work of any kind: If you’re a teacher, a plumber, or a brain surgeon, it doesn’t matter if a disability prevents you from working in your field – you will not qualify for SSDI benefits if you are physically able to hold any job, no matter how unskilled or low-paying.

• The process of getting SSDI benefits is notably stringent: The initial application requires extensive documentation and can take months to complete – and about 2/3 of claims are rejected.⁵ While the initial decision can be appealed, the process can stretch out for years. Plus, even if your claim is accepted, the average monthly benefit (in 2023) was just $1,489 per month.⁶

• The SSDI benefit period is considered very generous and lasts until age 65 (unless your disability resolves itself earlier), at which point you should qualify for Social Security retirement benefits.

What is individual disability insurance?

Individual disability insurance – sometimes known as private disability insurance – is coverage purchased from an insurance company and is separate from government-sponsored coverage. There are two basic types – short-term disability insurance (STD) and long-term disability insurance (LTD).

Short term disability insurance (STD)

STD is for temporary disabilities not covered by SSDI, SSI or long-term disability insurance (LTD). Here’s what you should know:

• Short term disability plans are most often provided by employers as an employer-paid group benefit to all employees with premiums typically paid in whole or in part by the employer. Compared to SSDI or long-term disability policies, the elimination period (waiting period) can be much shorter – typically two weeks.

• STD payments don’t replace all your wages, but the benefit usually equals 60%-80% of your income. However, those payments only last for a short period of time: the benefit period is typically 3-6 months or until you can get back to work.

• STD usually covers any injury or medical condition that renders you physically unable to do your job. However, some issues, such as mental illness or pregnancy, may or may not be covered, depending on the plan.

• STD benefits don’t come automatically – like other disability benefits, you must file a claim. The insurance company will need medical records or other evidence that you have a disabling condition.

• For longer-lasting disability protection, you should consider a long-term policy. It's important to note that even with the most generous plan, STD benefits rarely last for more than a year.

Long-term disability insurance (LTD)

LTD is for the same kinds of long-lasting disabilities covered by SSDI – but it may be considered easier to qualify for, and the benefit amount could be much more generous, depending on the policy and circumstances. Here are some key facts:

• LTD policies can require a significant investment: You can expect to pay anywhere from 1% to 3% of your annual income for a comprehensive long term disability policy.⁷ However, it’s important to note that in 2024, the premium cost is lower than the Social Security self-employed tax rate of 12.4%.

• Individual long term disability insurance coverage is usually more customizable than SSDI, and many policy features can be modified to help lower premium costs: For example, the waiting period can be longer or shorter than SSDI depending on the specific policy: a longer period will tend to lower premiums, and a shorter period will raise them.

• One of the advantages of getting a private LTD policy has to do with the benefit amount and the relative ease of qualifying for benefits: In a properly designed long term disability policy, the benefit amount should generally replace about 60%-80% of your after-tax income. That said, since benefit levels affect premium cost, a higher benefit could make the policy unaffordable, leading you to let the coverage lapse; a lower benefit could leave you struggling to make ends meet.

• An individual LTD policy can have a benefit period as short as two years – or it can go all the way to retirement (or until you recover from being disabled). Of course, the longer the benefit period, the more expensive the policy.

• You can choose between an own-occupation definition of disability or an any-occupation definition: Depending on who you are and what you do, either type of policy can be beneficial, but it's important to note that SSDI doesn't give you that option. That program only provides "any-occupation" protection that pays benefits if you are incapable of doing any work of any kind. However, a private disability policy with an "own-occupation" definition of disability pays benefits if you can't work in your specific profession or specialty. So, for example, a surgeon who loses part of a finger and can't perform surgery would get benefits even if they could perform other work. These types of policies, while more costly, are often chosen by professionals and independent business owners whose earning potential and lifestyle would be severely impacted by partial disabilities that make them unable to perform the things they do best – and earn to their full potential.

How to get an individual disability policy

Short term disability coverage is often included as part of an employee benefits package. If it's available, you should consider ensuring you're signed up: You could obtain lower group coverage rates, and your employer may pay for a portion of the cost (or even cover STD premiums 100%). However, many employers don't offer individual long term disability policies – and even if your employer does, the features and benefits may be limited.

If you are concerned that SSDI and/or SSI disability benefits would not support your lifestyle, speak with a financial professional to get the comprehensive long term disability policy you may need (or fill in the gaps of your workplace LTD with a supplemental policy). Ensure that the professional is familiar with the specifics of buying an individual disability policy – If you don't know one, a Guardian financial professional can help you. Give your financial professional as much information as you can about your financial situation and concerns so that they can start looking into disability insurance coverage options for you.

Get a quick policy cost quote using the Guardian disability insurance calculator.