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Disability Insurance & Survivors' Benefits

As Congress and the American people debate the future of Social Security, it is critical to remember that, unlike private retirement plans, Social Security has broader policy goals than merely providing retirement benefits. This fact often tends to be overlooked by those who want to restructure the program through privatization.

For more than 60 years, the Social Security program has been an extremely successful social insurance program, providing economic protections for people of all ages. It speaks to a universal need to address family uncertainties brought on by death, disability, and old age. It does this by protecting our most vulnerable citizens from falling into poverty, raising the standard of living for lower-income workers, and providing financial security to the spouses and dependent children in the event of a worker's disability or death.

As an insurance program, Social Security protects almost all families including spouses and children, against a variety of risks that can befall anyone. Those risks include:

  • Disability
  • Death of a working spouse or parent
  • Death of a retired spouse or caregiver
  • Retirement with insufficient personal savings or pension coverage
  • Outliving a family's assets
  • Erosion of purchasing power during retirement due to inflation

Two aspects of the Social Security program that emphasize the notion of social insurance are the Survivors' Benefit and Disability Insurance (DI), which are funded from the Old Age Survivors and Disability (OASDI ) fund. Thirty-eight percent of all Social Security benefit dollars are paid to disabled individuals, spouses of retired and disabled workers, dependent children, and survivors. Thus, of the forty-seven million Americans who collect payments from the Social Security program, almost eighteen million are not retired workers. These include five million spouses and children of retired and disabled workers, seven million spouses and dependent children of deceased workers, and six million disabled workers. Other non-retirees include non-disabled survivors and dependents. For the average wage earner with a family, Social Security insurance benefits are equivalent to a $476,000 life insurance policy or a $465,000 disability insurance policy.

Disability Insurance

Disability insurance provided through Social Security is the government's largest income support program for the disabled, providing monthly cash benefits to workers who sustain severe, long-term disabilities. People with disabilities benefit from Social Security under several categories of assistance. Those categories include: disabled workers, based on their own work histories, and their families; retirees with benefits based on their own work histories; adult disabled children who are dependents of disabled workers and retirees; adult disabled children who are survivors of deceased workers or retirees; and disabled widow(er)s.

Social Security is extremely important for disabled Americans. Today, people aged eighteen to thirty-five have a thirty percent chance of becoming disabled before reaching retirement age. Among persons aged eighteen to sixty-four, 30.8 million have an impairment or disability, 16.8 million have a work disability, and 8.1 million receive DI or Supplemental Security Income.

Beneficiaries with disabilities depend on Social Security for a significant proportion of their income. Approximately 18.5 percent of families with a disabled worker are poor. Without DI benefits, fifty-five percent of families with a disabled worker would have incomes below the poverty line. Social Security plays about the same role for disabled workers as aged beneficiaries. For example, it provides close to forty percent of total family income for disabled workers. Moreover, lower-income disabled workers have an even larger share of income from Social Security -- seventy-five percent of income for the lowest quintile.

Survivors' Benefit

Social Security survivor benefits play a critical role for American families. Younger Americans face roughly a one-in-five chance of dying before reaching age sixty-five. Today, Social Security pays monthly survivors' benefits to 7 million Americans, including almost 2 million children. Survivors' benefits, which are paid to a deceased worker's family, can help with financial problems that sometimes follow a worker's death by providing continuing cash income.

In fact, the value of the survivors insurance under Social Security is typically higher than the value of individual life insurance plans. The value of Social Security survivors' benefits for an average wage earner who dies and leaves a spouse and two children is equivalent to a $476,000 life insurance policy. The average monthly payment for the same family is about $2,243 per month. In addition, Social Security payments increase based on the annual cost-of-living index to help these families keep up with inflation - something few private insurance plans offer.


The nature of the Social Security programs as social insurance is essential to the protection of people with disabilities and dependents, and survivors of disabled or deceased workers. Proposals that partially or fully invest payroll taxes into private accounts remove the basic safety nets of survivors' and disability insurance, and force families to absorb the risk of market fluctuations.

Upon retirement, most privatization proposals require individuals to use their account funds to purchase an annuity plus life insurance that can be paid out to survivors upon death. But there is no insurance comparable to DI, which includes indexing for inflation and coverage for family members.

Privatization plans, which are likely to produce substantial pressure on the rest of the federal budget in the future, typically fail to account for the disability and survivors' protections of the traditional Social Security program. Advocates of private accounts repeatedly claim that disabled workers and survivors would be cared for in a privatized system, but they provide no details on the level of support and they do not explain how these benefits would be financed.

We at the National Committee believe these programs are too important to have the question of future funding left to the uncertainties of the federal budget process. Those who want to privatize Social Security should be required to show how they plan to guarantee funding for disability and survivors' benefits if they are successful in diverting the payroll taxes that fund these programs today into individual accounts.

Government Relations and Policy, August 2011

The National Committee is a nonprofit, nonpartisan organization that acts in the interests of its membership through advocacy, education, services, grassroots efforts and the leadership of the board of directors and professional staff. The work of the National Committee is directed toward developing a secure retirement for all Americans.

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