What is a social insurance supplement? Disability insurance has a number of riders that can be attached to a policy. Ultimately, these riders change the base policy is some form; either adding or subtracting benefits.
A social insurance supplement rider is no different. Some people benefit from the addition of one of these riders while others will prefer not to have it at all.
Like many of the statements made on this website, there is no “right” or “wrong”. The best disability insurance policy is the one that best fits your needs for a premium that you can afford.
What Is A Social Insurance Supplement?
First of all, not all disability insurance companies offer this benefit. Again, for some people, that will be a negative. For others, it is irrelevant since they would be unlikely to purchase a social insurance supplement rider in the first place.
A social insurance supplement can go by many names. It can be referred to as a social supplement, a social insurance substitute, or an integrated monthly benefit rider. Often in the insurance world, we just refer to it as an SIS rider.
No matter what name the insurance company calls their social insurance supplement rider, they all basically work the same way.
Essentially a social supplement is an offset against your disability benefit. Your disability benefits are reduced on a dollar for dollar basis by any federal, state, or “social” benefits for which you’re also qualified, up to a certain threshold.
As far as you’re concerned, as the insured, you should receive the same amount of monthly income if you’re disabled as you would without it. The sources of that income, however, may come from both the insurance company and from the social source.
For ExampleLet’s say that you purchase an individual disability insurance policy with a social insurance supplement rider. The total benefit is 5k per month, with $3,500 being “base” and $1,500 being a social supplement. If you become disabled and don’t qualify for any other benefits, the insurance policy pays the full $5,000. If you qualified for social security disability (for example) of $1,000 per month, then you would receive 4k from your disability insurance policy and the 1k from the federal government, totaling 5k. If the social coverage exceeds the supplement (let’s say $1,800 per month from social security), you would also be paid the overage. In this case, that would be $5,300 per month ($3,500 from your insurance company and $1,800 from the federal government).
In the above example, if this insured opted to not purchase a social insurance supplement rider and bought “all base” of 5k per month, they could receive 100% of their benefits from their disability insurance policy AND the federal assistance. If you have an all base policy, in theory, you could receive both benefits.
What If You Don’t Qualify For Additional Benefits?
The standard for receiving federal disability insurance is much higher than most of the individual disability policies available on the market today.
This comes down to the definitions of disability for both types of coverage. Social security uses an “any occupation” definition which means that you are unable to work in ANY profession to which you’re reasonably suited based on training, experience, and education.
The majority of the disability policies that we help consumers purchase are “own occupation” policies. Meaning that you would be considered disabled if you’re unable to do YOUR JOB due to sickness or injury.
Because of this difference, it is possible to qualify for disability under a personal policy and be denied disability coverage from a social source.
Were this to be the case, you would still have 100% of your benefit payable to you from your insurance company once on claim.
Remember, the social supplement is an offset. If there are no additional benefits being paid from a 3rd party, there is nothing to offset so the insurance carrier is on the hook for all of the benefit.
Why Buy A Social Insurance Supplement Rider?
After reading the above explanation and examples, you might be thinking, “Why would anyone buy a social insurance supplement rider?”
The answer: Money.
If you compare $2,000 of monthly base benefit to $2,000 of monthly social supplement, the supplement is much less expensive.
Why? Because if you’re severely disabled to the point where you would otherwise qualify for social assistance, then the insurance company doesn’t have to pay as much. They have a fallback to avoid paying 100% of the benefit that you have on your policy. You still receive 100% of your benefit (some from the company, some from the government) but the carrier gets away with paying less, so they charge you less in premiums.
For ExampleLet’s say a 30-year-old female registered nurse wants to buy disability insurance. She makes 60k per year and wants disability insurance for nurses with a traditional design: 90 day waiting period, own occupation, and residual coverage. If she were to purchase the maximum allowable coverage ($3,400 per month) of all base, it would cost approximately $154 per month. Instead, if she opted for half base and half social insurance supplement, the policy would only cost $120 per month.
As illustrated above, people buy the social supplements to reduce their overall costs. For those who only care about how much their monthly benefit is and not who pays it, social insurance supplements can be very attractive.
You Can’t Have Your Cake and Eat It Too…
The downside of a social insurance supplement is pretty straightforward: You can’t double dip.
That means that if you have an SIS rider AND receive additional benefits from something like social security disability, you wouldn’t be eligible to collect both.
When we talk about “base” benefit, that is a disability benefit payable regardless of other disability payments. A policy that is 100% “base” would allow you to collect all of the policy’s benefits upon disability and still apply for social assistance. If approved, you would get two checks, one for 100% of the monthly benefit from your disability insurance policy (assuming that you’re considered totally disabled) and another from the entity providing social support.
If you have an SIS rider on your disability insurance policy, then you’ll still receive two checks each month, however, the one from your disability insurance company will be offset up to a cap by whatever you receive in social benefits.
Social insurance supplements won’t let you get both benefits (or at least 100% of both benefits).
Summary
Is a social insurance supplement right for you?
Only you can answer that question.
Some people don’t want the hassle of having to apply for social coverage. Others want the ability to collect two checks at 100% of benefits paid.
For others, the premium savings of using an SIS rider make a lot of sense. After all, they only care that their monthly benefit can be met, regardless of who writes the check.
Either way, it makes sense to evaluate this option for your personal situation.
We provide expert, unbiased advice when it comes to disability insurance. If you’d like to know if a social insurance supplement is right for you, complete the quote form on the left or contact us to discuss your situation.
We’re here to help.