Social Security Disability Insurance

Disability Insurance is something that many people don't think about when they are young, single, and healthy.  But as the years pass and your financial responsibilities change, you may begin to think about the affects a sudden disability might have on you or others that depend on your income and that's where Social Security can help.

In fact, the Social Security Administration claims that nearly 30% of working Americans become disabled before reaching their normal retirement age.   In this article, we are going to explain some of the disability benefits under the Social Security program.  We've also got information elsewhere that talks about some of the benefits of purchasing supplementary disability insurance.

Qualifying for Disability Insurance Benefits

To qualify for disability insurance under the Social Security system, you must have worked in a job that was covered by Social Security.  If you've ever paid money into the Social Security system through payroll taxes, then you've worked in a job covered by Social Security.

Social Security Points System

The entire Social Security benefits program is built on a system of credits or points.  Generally, the more you work and the more money you earn the more credits you accumulate.  In 2006, you earned one credit for each $970 in wages.  The maximum number of credits you can accumulate each year is four.  So you would need to earn $3,880 in 2006 to earn your four credits for the year.

In most situations, you will qualify to collect benefits under Social Security if you have earned at least 40 credits, but 20 of those credits must have been earned in the last 10 years.  If you have the credits mentioned above, you definitely qualify for insurance benefits.  If you don't have the 40 credits, then you need to check the Social Security website.  There are a lot of exceptions to this rule, especially for younger workers that become disabled.

Qualifying Social Security Disability Insurance

To qualify for Social Security disability insurance, you need to become totally disabled.  If you are only partially disabled or the disability is expected to last for less than a year, then you may not qualify for benefits.  That's because Social Security's disability insurance is only for those that cannot return to work or cannot adjust to other work.  They have a pretty strict definition that we will explain briefly below.

Disability Insurance Qualifying Rules

To decide if you are disabled, Social Security has a number of steps that you need to go through sequentially.  That means you need to pass all these steps to qualify for benefits:

1. Work - if you are still working and earning more than $860 each month you are not considered disabled.
2. Severity of Condition - your disability must interfere with your ability to work.
3. Disabling Conditions - the Social Security administration maintains a list of severe conditions that automatically qualify you for disability insurance.  If your condition is not on the list, then a ruling will be made on your condition.
4. Disability Ruling - even if you have a pretty serious disability - one that is not on the list mentioned above - the administration still needs to decide if this will interfere with your ability to work in your present job.
5. Other Work - finally, even if you are unable to work as you did before becoming disabled; the administration must also rule that your skills are not transferable to other types of work.

Applying for Social Security Disability Insurance

The process of applying for disability insurance benefits under Social Security is pretty simple; you can just call them at their toll free telephone number 1-800-772-1213 or visit the Social Security website at the link mentioned earlier.

Social Security Disability Insurance Benefits

To figure out your exact insurance benefits, the Social Security administration would use historical information that they maintain through IRS tax records.  We will summarize the categories of benefits below that go beyond individual benefits, then give a couple of examples so you might get an idea of how much insurance funds you qualify for:

• Family Disability Benefits - each of your family members might also be eligible for benefits payments, but generally there is a limit of around 180% of the individual's benefit for the entire family. So if you qualify for $10,000 as an individual, your total family benefits cannot exceed $18,000.
• Spousal Disability Benefits - additional benefits are payable to your spouse if they are caring for a child under the age of 16 or a disabled child.
• Benefits to Children - if you child (or a dependent grandchild) is unmarried and under the age of 18 or a full time student 19 or younger, then they qualify for additional insurance benefits under social security.

Example Calculations - Social Security Benefits

Finally, we are going to give a couple of quick examples, all estimates assume that you pass the qualifying tests and have the full credits mentioned earlier:

Example 1 - if you are age 45 and earning around $50,000 annually, your disability insurance benefits would be $1,400 per month, with a maximum family benefit of $2,537 per month.

Example 2 - if you are age 45 and earning around $25,000 annually, your disability insurance benefits would be $889 per month, with a maximum family benefit of $1,411 per month.

Example 3 - if you are age 35 and earning around $50,000 annually, your disability insurance benefits would be $1,481 per month, with a maximum family benefit of $2,676 per month.

Example 4 - if you are age 35 and earning around $25,000 annually, your disability insurance benefits would be $930 per month, with a maximum family benefit of $1,552 per month.

Example 5 - if you are earning around $95,000 or more, you probably qualify for the maximum disability benefits under the Social Security system.  In that situation, the maximum individual benefits are $1,961 each month with a maximum family benefit of $3,449 monthly.

You can find a more detailed benefits calculator on the Social Security website.

2007 / 2008 Social Security Changes

Social Security is funded through a combination of employer taxes and employee payroll deductions.  Each year the amount of money an individual can contribute to Social Security is increased by a Cost of Living Adjustment (COLA).  Employees are taxed at a rate of 6.20% (OASDI), subject to maximum taxable earnings / contributions as shown in the tables below:

Maximum Social Security Contributions

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