Disability insurance replaces your income when an injury or illness leaves you disabled and unable to work. You have to pay a monthly premium for coverage, and you may be able to lower the cost of your long-term disability insurance policy by adding a social insurance rider.
Depending on the insurance company, social insurance riders may be called a social insurance supplement rider (SIS) or social insurance substitute rider, a social insurance benefits rider, or supplemental disability income rider (SDIR).
The SIS rider requires you to apply for Social Security disability insurance (SSDI) if you become disabled, and your Social Security benefits will be used to offset the benefits you receive from your individual disability coverage. Some long-term disability insurance policies require you to have the social benefits offset rider, or even have it written into the policy itself.
How does a social insurance rider work?
When you have a long-term disability insurance policy, you can file a claim to receive benefits from the insurance company if you become disabled. If your policy has an SIS rider, you’ll have to apply for disability benefits from Social Security, too.
The Social Security Administration provides free disability benefits to people who are totally and permanently disabled, but the benefit amounts are usually small and it can be hard to qualify. (You don't have to pay for disability coverage from SSDI because it’s paid for with tax dollars.)
If your Social Security claim is approved, your long-term disability insurance will reduce how much it pays you by the amount you're receiving from Social Security.
Let’s say you have a long-term disability insurance policy with a $3,000 monthly benefit. You become disabled and apply for SSDI at the same time you file a claim for long-term disability insurance benefits. Once you're approved, Social Security pays you a monthly benefit of $1,000. With an SIS rider, the insurance company will now reduce the benefit amount it pays you to $2,000.
If you get rejected for SSDI benefits, the disability insurance company can still pay you the full benefit amount, although it may require you to make an appeal to Social Security.
When you have a social insurance rider, insurance companies may take other types of social benefits into account besides Social Security disability, like workers’ compensation, Railroad Retirement disability income, and government retirement and disability funds.
Should I add an SIS rider to my disability policy?
The social insurance substitute rider lowers the disability insurance company's chances of having to pay you full benefits if you become disabled by sharing the obligation with Social Security and other programs. For that reason, disability policies that come with an SIS rider are often more cost-effective than those that don't.
In other cases, you may not have a choice and the terms of the SIS rider may come built into your disability coverage. If you’re looking for a long-term disability policy, the licensed experts at Policygenius can help you shop for coverage that meets your needs and situation.
If you opt not to get a SIS rider, you can still file a claim for Social Security benefits when you become disabled. That means you can receive monthly benefits from your long-term disability insurance in addition to any SSDI benefits that you qualify for.
Keep in mind that it’s hard to qualify for Social Security disability, which has a stricter definition of disability, so it's best not to rely on it as your only source of income protection if you become disabled.