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How Does My Insurance Policy Impact My Long Term Disability Claim?

Disability Wiki.

disability paperworkThe terms of your long term disability policy will heavily influence the outcome of your claim. The policy serves as your primary source of rights with respect to your benefits, but it also sets forth many obligations that you must satisfy.  You should thoroughly review your policy before going out on long term disability, filing your claim, or filing an appeal.  Understanding your policy's terms will substantially increase your chances of success. 

There’s a lot to consider, and you need answers.  We can help.  Below you'll find the important terms found in most long term disability policies.  You'll also find numerous tips and best practices for taking advantage of your policy provisions. 

The Definition of Disability

The most important provision of your policy is the definition of disability.   The definition of disability sets forth the criteria you must satisfy in order to be awarded disability benefits.  Understanding this criteria is important.  A common misconception is that you must be bed bound in order to be disabled.  That simply is not true.  The definition of disability varies by the policy, but all are focused on whether you could perform work, rather than whether you could function with your life in general. 

Generally, there are three types of definitions found in disability policies: (1) own occupation; (2) any occupation; and (3) hybrids.

"Own Occupation" Definition of Disability

own occupation“Own Occupation” - or sometimes described as “regular” occupation - policies are the best.  Under this definition of disability, you only will be required to prove you cannot perform the "essential" duties, or “material and substantial” duties, of your “regular occupation.” That is, the occupation you are performing when you become disabled.  Learn more about occupational standards.

An example of an “Own Occupation” definition of disability is as follows:

  • “You are limited from performing all of the material and substantial duties of your regular occupation and you are not working in any other occupation."

The term “material and substantial duties” is typically defined as: “duties normally required for the performance of your regular occupation; and which cannot be reasonably omitted or modified.”

Learn more about variations in own occupation definitions.

Practical Tip: Be mindful of the definition for the term “Own Occupation” itself.  Generally, your insurance company will look at the way your occupation is performed in the general economy.  So, if a certain duty (e.g., travel) is unique to your specific employer, your insurer may not consider it as a material and substantial duty of your occupation.   Your insurer will view that as a duty specific to your employer or your location at the employer, rather than as a duty common to other people in your occupation. 

For purposes of determining what your "occupation" is, most policies will look to “the occupation you are routinely performing when your disability begins." 

Learn more about own occupation definitions.

"Any Occupation" Definition of Disability

any occupation“Any occupation” policies require you to satisfy a more stringent standard.  Generally, you must establish you are incapable of performing any occupation for which you may be qualified based on your education, training, and experience. Thus, under an “any occupation” standard, you need to prove not only that you are unable to perform the duties of your own occupation, but also are unable to perform the duties of any other occupation you are qualified for based on your education, training, and experience.

Proving disability under an "any occupation" standard is more difficult than just establishing disability from your own occupation. This is because you must prove you cannot perform the duties of many jobs, not just your own.

Examples of “Any Occupation” definitions of disability include the following:

  • “You are unable to perform the material and substantial duties of any occupation for which you are reasonably fitted by your education, training or experience”; or
  • “You are unable to earn more than 60% of your Pre-disability Earnings from any employer in your Local Economy at any gainful occupation for which you are reasonable qualified taking into account your training, education, experience and Pre-disability Earnings.”

Generally speaking, you are “reasonably fitted” for an occupation if you: (1) have the physical and mental ability (the “functional capacity”) to do it; (2) the education, training, and experience to do it; (3) the job exists in your local economy; and (4) you (in theory) would be able to obtain such a job.

For example, a claimant who is a medical doctor may have the education, training, and experience to work as a medical record reviewer or a medical equipment salesperson.  However, these occupations may not be “reasonably fitted” if she doesn’t have the physical or mental ability to do them, or if few such jobs exist in her area.

Additionally, in the second example, the “Any Occupation” definition of disability contains a 60% earnings requirements.  So, if you are to work in a lesser occupation but are unable to earn 60% of your pre-disability earnings, you still are considered “disabled.” 

For example, prior to your disability, you worked as a stock broker earning $40,000 per month.  You are still considered “disabled” from “Any Occupation” even if you are capable of returning to work in a job that pays $20,000 per month.  Of course, keep in mind that the monthly income from your job may reduce your LTD benefit as discussed under “Working While Disabled” below.

Learn more about any occupation definitions.

Hybrid Definition of Disability

hybrid definition of disabilityHybrid policies contain both an "own occupation" and an "any occupation" standard. Typically, these policies require you to establish disability from your own occupation for a specific period of time (usually 24 months), after which you must establish disability from any occupation.

Examples of hybrid definitions of disability include the following:

“You are considered Disabled if, solely because of Injury or Sickness, you are:

  1. unable to perform the material duties of your Regular Occupation; and
  2. unable to earn 80% or more of your Indexed Earnings from working in your Regular Occupation.

After Disability Benefits have been payable for 24 months, you are considered Disabled if, solely due to Injury or Sickness, you are:

  1. unable to perform the material duties of any occupation for which you are, or may reasonably become, qualified based on education, training or experience; and
  2. unable to earn 80% or more of your Indexed Earnings.”

Or:

“You are considered Disabled if:

  1. after your Elimination Period and during the next 24 month period, you are unable to earn more than 80% of your Pre-disability Earnings at your Own Occupation for any employer in your Local Economy; or
  2. after the 24 month period, you are unable to earn more than 60% of your Pre-disability Earnings from any employer in your Local Economy at any gainful occupation for which you are reasonable qualified taking into account your training, education, experience and Pre-disability Earnings.”

Practical Tip: Because the definition of disability may change as your claim approaches the end of the 24-month period (in the examples above), you will have to convince your insurer that you are disabled under the "Any Occupation" standard at that point.  You can do this by submitting updated evidence that proves you cannot perform the duties of “Any Occupation.”  This may involve both updated testing and reports/statements from your treatment doctor(s).

Learn more about hybrid definitions of disability. 

Eligibility Provisions

Elimination Period

The Elimination Period is the waiting period before LTD benefits become payable.  How long the period lasts will depend on your specific policy terms.  Typically, the Elimination Period is either 90 days or 180 days in length.  But, sometimes, it may be as long as 365 days.   

So, for example, if you become disabled on January 1st and the Elimination Period is 180 days, your LTD benefits will not begin until June 30th.  If your Elimination Period were 365 days, your LTD benefits would not begin until the following January 1st (one calendar year later).

Practical Tip: Based on the above example, even though your LTD benefits will not begin until the end of the Elimination Period, you must remain “disabled” throughout the entire Elimination Period for benefits to become payable.

Active Employment

active employmentTo be eligible for LTD benefits, you must be in “Active Employment” or “Active Service,” which is generally defined as “working for your employer for earnings that are paid at regular intervals, and performing the material and substantial duties of your regular occupation for the minimum number of hours as described in the Schedule of Benefits.”

Thus, to be eligible for benefits, you must also be working a minimum number of hours per week.  For example, your LTD policy's Schedule of Benefits may state you are in an eligible class if you are “regularly working a minimum of 30 hours per week.”

If you do not meet the eligibility criteria, your claim can be denied before the insurance company even gets to the merits of your claim.

Appropriate Care and Treatment

appropriate treatmentVirtually all disability policies require you to maintain “Appropriate Care and Treatment” with a physician or be under the “Regular Care” of your doctor.  This means that you must consistently visit a physician specializing in the treatment of your specific disabling medical conditions(s) as often as is reasonable under the circumstances.  Your insurance company can deny your long term disability claim if you do not regularly treat with your doctor for your disabling medical conditions.

The definitions of these terms vary.  For example:

  • “Appropriate Care and Treatment means medical care and treatment that meet all of the following:
    • it is received from a Doctor whose medical training and clinical experience are suitable for treating your Disability;
    • it is necessary to meet your basic health needs and is of demonstrable medical value;
    • it is consistent in type, frequency and duration of treatment with relevant guidelines of national medical, research and health care coverage organizations and governmental agencies;
    • it is consistent with the diagnosis of your condition; and
    • its purpose is maximizing your medical improvement.”
  • “Regular Care means:
    • you personally visit a physician as frequently as is medically required, according to generally accepted medical standards, to effectively manage and treat your disabling condition(s); and
    • you are receiving the most appropriate treatment and care which conforms with generally accepted medical standards for your disabling condition(s) by a physician whose specialty or experience is the most appropriate for your disabling condition(s), according to generally accepted medical standards.”

Some LTD policies contain an exception to this rule.  For instance, your LTD policy may state that “Regular Care” is not required if you reached maximum medical improvement.  In other words, if further treatment would provide no added benefit or improvement in your symptoms, ongoing treatment may not be required.

Monthly LTD Benefit Amount and Offsets

monthly ltd benefitUnfortunately, your monthly LTD benefit will not fully replace your salary.  Rather, your long term disability benefit likely will be a fixed percentage of your gross monthly salary less other income benefits.  Most group plans provide for an LTD benefit representing either 50%, 60% or 66.67% of your salary up to a monthly maximum (for instance, up to $15,000).

Other policies – mainly Individual Disability Policies – specify a dollar figure that is not connected to your salary. 

Using the above 60% example, your LTD benefit likely will be calculated as follows:

  • Multiply your “monthly earnings” or “pre-disability earnings” by 60% (e.g., the benefit percentage);
  • Compare the answer with the maximum monthly benefit. The lower amount is your gross monthly LTD benefit; and
  • Subtract from your gross monthly LTD benefit any “other income benefits” or “deductible sources of income.”

This amount will be your monthly disability payment.

Monthly Earnings/Pre-disability Earnings

The amount of your monthly LTD benefit payment is based on the amount of money you were earning prior to your disability.  Therefore, in calculating the amount of your monthly disability benefit payments, your insurer will first have to determine your “Monthly Earnings” or “Pre-disability Earnings.”  This may seem like a simple task, but it can be slightly more complicated because your monthly earnings may not include all of your prior compensation.  For instance, your “Pre-disability earnings” may not include your bonus or overtime pay.

Common examples of the definition of “Monthly Earnings” or “Pre-disability Earnings” include:

  • “Monthly Earnings means your monthly rate of earnings from the Sponsor in effect immediately prior to the date Disability or Partial Disability begins.  However, such earnings will not include bonuses, commissions, overtime pay and extra compensation.”
  • “Monthly Earnings means your earnings as figured from the W-2 form (from the box that reflects wages, tips and other compensation for federal income tax purposes) received from your Employer for the calendar year just prior to the date your Disability begins.  If you did not receive a W-2 from your Employer, Monthly Earnings means your average monthly earnings from your Employer for the months you are employed.”
  • “Pre-disability Earnings means your benefits eligible pay as determined by your Employer, as of the day prior to the date your Disability begins.

Practical Tip: Given the variation in the way “Monthly Earnings” or “Pre-disability Earnings” can be defined, it is important to review your LTD policy prior to your last day worked.  This will help you gauge how much money you will receive while on disability.

Additionally, if “Monthly Earnings” is defined as your earnings immediately prior to your disability, you should try to avoid reducing your hours and taking a pay cut.  The pay cut, in particular, would end up reducing the amount of the LTD benefit to which you are entitled.

Maximum Benefit Amount

When calculating the amount of your disability benefit, you should keep in mind that most policies contain a “maximum” benefit amount.  For instance, your LTD policy may provide for a benefit in the amount of 60% of your monthly earnings – but to a specified maximum per month. 

The maximum benefit in group policies runs the gambit, anywhere from $5,000 per month to $35,000 per month.  The most common is $15,000 per month.

Given the maximum benefit amount, if you were earning a very high salary prior to your disability, your LTD benefit may not even come close to 60% of your “pre-disability earnings.”  For example:

  • Say you were earning $50,000 per month prior to your disability and your LTD policy provides for a 60% benefit to a maximum of $15,000 per month.  You would receive the maximum benefit of $15,000 per month, which is only 30% of your “pre-disability earnings.”

Minimum Benefit Amount

Just like there is a maximum benefit amount, most LTD policies contain a minimum benefit amount.  Policies contain a minimum benefit amount because certain other income benefits (discussed below) will reduce the amount of your gross LTD benefit.  So, it is possible for you to be eligible for and receive multiple other income benefits that completely wipe out your LTD benefit.  In that situation, the minimum benefit amount provision gives you some benefit, albeit usually very minimal. 

For example, the minimum benefit amount may be only $50 or $100 or 10% of your gross monthly benefit amount.

Other Income Benefits/Offsets

other income benefitsGroup LTD policies (e.g., policies offered by your employer) almost always contain provisions providing for a reduction of your LTD benefits by certain other income benefits you receive or are eligible to receive.  These reductions or “offsets” usually include benefits you receive as a result of the same disability for which you are receiving LTD benefits.

Offsets typically found in long term disability policies include, without limitation: 

  • Social Security Disability Income benefits received both by you and your dependents;
  • Workers’ Compensation benefits;
  • Other public or government-provided disability benefits (e.g., State Short Term Disability benefits);
  • Disability benefits payable under other group insurance or similar insurance plans;
  • Social Security Retirement or other government/publicly funded retirement benefits;
  • Pensions or other employer-provided retirement benefits;
  • Earned income if you are able to return to work in some capacity;
  • Salary continuation;
  • Sick pay;
  • Bonuses;
  • No-fault payments;
  • Personal Injury Settlements or other awards for loss of earnings; and
  • Severance pay.

Practical Tip: The approval of your claim(s) for Other Income Benefits, such as Social Security Disability benefits, may take much longer than the approval of your LTD benefits, and subject you to an overpayment claim from your insurance company. 

If the insurer begins to pay your LTD benefits without reduction, a retroactive award of Other Income Benefits would result in an overpayment.  So, most insurers will require you to sign a Reimbursement Agreement.  In the Reimbursement Agreement, you agree that if your claim for Social Security Disability benefits, for example, is approved in the future, you will repay any overpayment resulting from the retroactive award of Social Security Disability benefits.

For example, your claim for LTD benefits is approved and you begin receiving a monthly benefit in the amount of $8,000 in April 2019.  Around the same time, you also apply for Social Security Disability benefits.  But, due to an initial denial of your claim and the need to attend a hearing, your Social Security Disability claim is not approved until April 2021 in the amount of $2,500 per month.  At that time, you receive a retroactive Social Security Disability payment in the amount of approximately $60,000.  After informing the insurer of your Social Security Disability approval, the insurer will advise you that your LTD benefit will be reduced from $8,000 per month to $5,500 ($8,000 - $2,500) per month.  In addition, the insurer will advise you that pursuant to the terms of your LTD policy and the Reimbursement Agreement, you now have to repay to all or most of the $60,000 Social Security paid you.   

Therefore, on its face, it may seem like your LTD policy provides you with a monthly benefit equivalent to 60% of your pre-disability earnings.  In reality, however, your LTD benefit could be much lower.  The insurance company will pay 60% of your pre-disability earnings less any offsets.

Limitations and Duration of LTD Benefits

Maximum Benefit Period

All Group LTD Policies contain an end date for your LTD benefits. This is called the Maximum Benefit Period.  Benefits under employer sponsored LTD plans will not be payable throughout your lifetime.  The Maximum Benefit Period generally depends on the age at which you become disabled.

For example, your policy may state:

  • If you become disabled prior to the Age of 61, your LTD benefits will be paid through your 65th birthday OR through your Social Security Normal Retirement Age (see https://www.ssa.gov/oact/progdata/nra.html)
  • If you became disabled at Age 61, benefits will be paid for 48 months
  • If you become disabled at Age 62, benefits will be paid for 42 months
  • If you become disabled at Age 63, benefits will be paid for 36 months
  • If you become disabled at Age 64, benefits will be paid for 30 months
  • If you become disabled between Ages 65 and 75, benefits will be paid for 24 months
  • If you become disabled after age 75, benefits will be paid for 12 months

In contrast to group policies, Individual Disability Income (“IDI”) policies may provide for a lifetime benefit if you become disabled prior to a certain age (assuming you chose that option in your application for the policy).  For example, your IDI policy may state that you are entitled to lifetime benefits if your total disability begins prior to the age of 60.  IDI policies also may provide for lifetime benefits if your disability is due to an “Injury” as opposed to a “Sickness.”  And, sometimes in the event of a "sickness" the benefit payable after age 65 may be reduced.

Mental/Nervous Limitation

mental nervous limitationYour policy may limit the duration of your benefits if your disability results from a psychiatric condition, such as anxiety or depression. This is commonly referred to as a “Mental Illness Limitation” or “Mental/Nervous Limitation.” Under this limitation, the maximum benefit period is typically 24 months, but may be shorter or longer depending on the terms of your policy.  Benefits may be extended past 24 months if you are hospitalized due to your mental illness.

Some Mental Illness Limitations contain exemptions for certain mental conditions. These exemptions often include:

  • Organic brain disorders
  • Schizophrenia
  • Alzheimer’s disease dementia
Less commonly, exemptions also may include bipolar disorder.

Examples of Mental/Nervous Limitation provisions include the following:

  • “We will pay Disability Benefits on a limited basis during your lifetime for a Disability caused by, or contributed to by, any one or more of the following conditions. Once 24 monthly Disability Benefits have been paid, no further benefits will be payable for any of the following conditions: (1) Anxiety disorders; (2) Delusional (paranoid) disorders; (3) Depressive disorders; (4) Eating disorders; (5) Mental illness; and (6) Somatoform disorders (psychosomatic illness).  If, before reaching your lifetime maximum benefit, you are confined in a hospital for more than 14 consecutive days, that period of confinement will not count against your lifetime limit. The confinement must be for the Appropriate Care of any of the conditions listed above.”
  • “Monthly Benefits are limited to 24 months during your lifetime if you are Disabled due to a Mental Disorder or Disease, unless the Disability results from: (1) schizophrenia; (2) bipolar disorder; (3) dementia; or (4) organic brain disease.”

You should take note of the subtle differences in the above provisions.  The first provision states that the “Mental Illness Limitation” will apply if your disability is “caused or contributed to by” a mental illness, where as the latter provision states that the “Mental Illness Limitation” will apply if your disability is “due to a Mental or Nervous Disorder…”

So, in the first example, if you are disabled due to the combined effect of both a physical and mental disability, the insurance company could seek to limit your benefits to 24 months.  In either of the definitions above, if you suffer from both a physical and mental disability, in order to get past the 24 month limitation, you would need to prove that you physical disability is disabling in and of itself. 

In addition to the limitation itself, you should also be cognizant of the definition of the term “Mental Illness.”  For instance, “Mental Illness” can be defined simply as:

  • "Mental Illness means a medical condition of sufficient severity to meet the diagnostic criteria established in the current Diagnostic And Statistical Manual Of Mental Disorders. You must be receiving Appropriate Care and Treatment for your condition by a mental health Doctor.”

Or it can be defined as:

  • “Mental Illness means any mental, emotional, behavioral, psychological, personality, cognitive, mood or stress-related abnormality, disorder, disturbance, dysfunction or syndrome, regardless of cause (including any biological or biochemical disorder or imbalance of the brain) or the presence of physical symptoms. Mental Disorder includes, but is not limited to, bipolar affective disorder, organic brain syndrome, schizophrenia, psychotic illness, manic depressive illness, depression and depressive disorders, anxiety and anxiety disorders.”

There is another subtle difference here that could have a big impact on your disability claim.  In the first example, “Mental Illness” is simply defined as a condition found in the Diagnostic and Statistical Manual of Mental Disorder.  So, if you are disabled due to Lyme disease and suffer from secondary depression, it would be difficult for the insurer to limit your benefits to 24 months. 

By contrast, in the second example, the definition of “Mental Illness” is broader.  It could include any mental or emotional symptom/diagnosis regardless of cause or the presence of physical symptoms.  In this case, if you are disabled due to Lyme disease but also suffer from secondary depression, the insurer can seek to limit your disability benefits to 24 months despite the fact that the main cause of your disability is fatigue and pain from Lyme disease. 

Learn more about Mental Illness Limitations.   

Subjective/Self-Reported Symptom Limitations

subjective symptomsSome long term disability policies contain a "Subjective Symptoms Limitation," which is sometimes called a "Self-Reported Symptom Limitation."  This limitation attempts to limit the period of payable benefits (typically to 24-months only) for certain conditions which may be more difficult to measure by objective evidence. 

These conditions often include:

  • Pain conditions
  • Chronic Fatigue Syndrome, also known as Myalgic Encephalomyelitis ("CFS/ME")
  • Fibromyalgia
  • Depression/Anxiety
  • Certain digestive issues and nausea
  • Headaches/Migraines
  • Tinnitus
  • Dizziness

If enforced, the Subjective or Self-Reported Symptom limitation may give your insurance company the ability to cap benefits, despite your insurance company accepting your diagnosis and disability.  You can combat the limitation by undergoing all objective testing that may be available for your condition.  However, you also should check with an attorney to see if your state has prohibited or banned enforcement of such limitations.  There are some states where this limitation is not enforceable, despite its presence in the policy. 

Pre-Existing Condition Limitation/Exclusion

Most, if not all, disability policies contain a Pre-Existing Condition Limitation or Exclusion.  To determine whether your disability is excluded from coverage, you must carefully examine the policy’s “look back period” and “pre-existing condition waiting period.” 

The “look back period” determines what is considered a pre-existing condition under the policy. Typically, the policy will look back for conditions that existed within 3 months of coverage. Any such conditions are considered "pre-existing."

The “pre-existing condition waiting period” is the amount of time you must wait before becoming covered for that condition. Typically, the waiting period is one year following the beginning of your coverage under the policy. After the waiting period ends, and you did not become disabled during such period, you will be eligible for coverage for the previously excluded pre-existing condition.

An example of a typical Pre-Existing Condition Exclusion is:

  • “You may be Disabled due to a Pre-existing Condition. No benefits are payable under This Plan in connection with that Disability unless your Elimination Period starts after you have been an Active Employee under This Plan for 12 consecutive months.  A Pre-existing Condition is an injury, sickness, or pregnancy for which you in the 3 months before the Effective Date of your coverage: (1) received medical treatment, consultation, care, or services; (2) took prescription medications or had medications prescribed; or (3) had symptoms or conditions which would cause a reasonably prudent person to seek diagnosis, care, or treatment.”

Practical Tip: In New York, insurance companies cannot completely preclude benefits if you suffer from a pre-existing condition.  Rather, the benefit start date will be tolled for 12 months beginning on the date your LTD coverage became effective.  So, for example, if you became covered under your employer’s LTD plan on April 1, 2018, and your disability is due to a pre-existing condition, your LTD benefits would begin on April 1, 2019, assuming you met the Elimination Period by that date.

Learn more about Pre-Existing Condition Limitations.  

Residual or Partial Disability Benefits

partial disabilityMost disability policies allow you to work while you are disabled and still receive LTD benefits.  These provisions can be called:

  • Residual Disability Benefits;
  • Partial Disability Benefits;
  • Work Incentive Benefits; or
  • Rehabilitation Benefits

Of course, there is a limit to how much you can earn while working and receiving disability benefits.  To determine that limit, you should look at either the definition of disability or the provision discussing when benefits will end (often called “Termination of Disability Benefits”). 

For example, the definition of disability in your policy may state that you are disabled if you are unable to perform the material and substantial duties of your occupation and unable to earn more than 80% of your pre-disability earnings.  If that is the case, you would no longer be considered disabled because your disability earnings are over 80% of your pre-disability earnings.  As a result, your LTD benefits would end.

If the definition of disability is silent on this issue, the Termination of Disability Benefits may state that benefits will end if you are earning more than 80% of your pre-disability earnings.

Disability Earnings

Disability earnings refer to the amount of any salary or wage you receive for work performed while you are disabled. 

This generally does not include passive income like rental income or other investment income.

Calculation of the Residual or Work Incentive Benefit

benefit calculationYour residual or work incentive benefit can be calculated in a number of different ways. 

First, most - if not all - policies allow you to receive your full disability benefit if you are earning less than a certain percentage (usually 20% or 25%) of your pre-disability earnings.

For instance, your LTD policy may state: “We will send you the full monthly payment if you are disabled and your monthly disability earnings, if any, are equal to or less than 25% of your indexed monthly earnings.” So, if your pre-disability earnings were $10,000 per month, and you returned to work while on disability earning $1,500 per month, your LTD benefit would not be reduced because your disability earnings are only 15% of your pre-disability earnings. 

Second, if you are earning between 20% and the maximum limit (e.g., 80%) of your pre-disability earnings, an insurer may reduce the amount of your LTD benefit.  Common examples of the ways an insurance company can reduce your LTD benefit include:

Work Incentive Benefit. In this situation, an insurer will not reduce the amount of your LTD benefit unless the sum of your gross disability payment and your disability earnings (e.g., the amount of money you earn while disabled) exceed 100% of your pre-disability or indexed pre-disability earnings. This is usually for a limited period of time (e.g., 12 or 24 months).

For example: if your pre-disability earnings were $10,000 per month and your LTD policy provides for a 60% benefit, your gross LTD benefit would be $6,000 per month.  If you find a less demanding job paying you $2,000 per month, your LTD benefit would not be reduced because the sum of your gross monthly LTD benefit ($6,000) and your disability earnings ($2,000) is less than your pre-disability earnings of $10,000 per month.

But, if you were earning $5,000 per month at your new job, the sum of your gross monthly benefit and your disability earnings would total $11,000.  As a result, your LTD benefit would be reduced by $1,000 (e.g., the amount over your pre-disability earnings)

Proportionate Loss.  Here, an insurer will reduce your LTD benefit by the percentage of your lost income.  To do so, your insurance carrier will:

  1. Subtract your disability earnings from your pre-disability or indexed pre-disability earnings.
  2. Divide the answer in item 1 by your pre-disability or indexed pre-disability earnings. The answer is the percentage of lost income.
  3. Multiply your net monthly LTD benefit by the answer in item 2.

So, using the example above, you will receive an LTD benefit in the amount of $4,800, calculated as follows: your pre-disability earnings ($10,000) minus your disability earnings ($2,000), divided by your pre-disability earnings ($10,000) equals .80.  And, 80% of your monthly LTD benefit is $4,800.

Partial Reduction for Disability Earnings. Here, the insurance company will reduce your LTD benefit by a certain percentage of your disability earnings.  For example, the policy language  may state: “the monthly benefit payable is the gross disability benefit reduced by Other Income Benefits and 50% of your Disability Earnings.” 

Recurrent Disability

recurrent disabilityA Recurrent Disability occurs when you attempt to return to work on a full time basis, but find that you are unable to do so because of a recurrence of your symptoms and conditions.  The term Recurrent Disability is typically defined as “a disability which is: (1) caused by a worsening in your condition; and (2) due to the same cause(s) as your prior disability for which you received benefits.” 

The recurrent disability provision allows you to continue your prior disability benefits without having to complete another elimination period.  But, there is a limit to the amount of time you can return to work and have your subsequent claim be considered a recurrent disability, usually 6 months. 

if you are thinking about returning to work, but are not sure you will be able to handle the job responsibilities, you should consult the specific language in your policy.  Confirm whether you will be eligible for a recurrent disability if your attempt to return to work fails by speaking with an attorney.

Survivor Benefits

Some group disability policies provide for an additional benefit to your surviving spouse or another family member if you were to pass away while still receiving disability benefits.  The survivor benefit is typically equal to 3 months of your gross disability payment.  The survivor benefit can be larger or smaller depending on the terms of your policy.

Policy Deadlines

All disability policies contain certain deadlines which specify time frames by which you must take certain action.  Failure to do so may result in the denial of your claim.  Examples of important deadlines include:

Notice of Claim

Notice of Claim is just as it sounds.  After you become disabled, you must notify the insurance company of your intention to file a disability claim.  Notice of claim must be provided within a certain amount of time after your disability begins.  The deadline will vary depending on the terms of your policy.  You should include you name, date of birth, social security number, employer’s name, and policy number (if known). 

A typical Notice of Claim provision will state:

  • “We encourage you to notify us of your claim as soon as possible, so that a claim decision can be made in a timely manner.  Written notice of a claim should be sent within 30 days after the date your disability begins.”

Proof of Claim

proof of claimProof of claim refers to the evidence you must provide to the insurance company to prove that you are disabled as defined by your policy.  Proof of claim includes, without limitation:

  • the date your disability began;
  • the cause of your disability;
  • your restriction and limitations that prevent you from working;
  • that you are under the regular care of a physician;
  • the contact information for your treating providers;
  • appropriate documentation of your symptoms/medical conditions (e.g., your medical records, objective testing, etc.); and
  • documentation of your pre-disability income, any disability earnings, and any deductible sources of income.

Proof of claim must be provided within a certain amount of time after your disability begins.  If you do not provide timely proof of claim, your claim can be denied.  Typically, proof of claim must be submitted within a certain number of days after your Elimination Period ends or after your disability begins. 

The deadline for submitting proof of claim is generally a short deadline that can be extended in only limited circumstances.  For example, if you lack legal capacity or have a reasonable excuse for delay, the insurer may extend your time to submit your claim.

These deadlines are very important.  If you do not meet them, the insurer may use it as a reason to deny your claim.

A number of these deadlines have been suspended because of Covid-19.

Legal Actions

legal actionIn the unfortunate situation where your claim and appeal for disability benefits is denied, you have the right to commence a lawsuit.  Disability policies typically specify the deadline within which you must sue the insurance company.   

A standard policy language will state:

  • “You can start legal action regarding your claim 60 days after proof of claim has been given and up to 3 years from the time proof of claim is required, unless otherwise provided under federal law.”

Using the above language, if you became disabled on January 1, 2019, and proof of claim was required to be filed within 90-days after your 180 day Elimination Period, your deadline to file a lawsuit would be October 1, 2022 (90 days + 180 days + 1,095 days).

If you miss the deadline to commence a legal action, the court may dismiss your case, and you could be forever barred from filing a lawsuit to recover your disability benefits. 

Conclusion

Long term disability policies have many complicated provisions.  Lack of compliance may result in denial of your claim.  A long term disability attorney can help you maximize the policy's terms to your benefit.  You should always consult with a long term disability attorney for guidance. The  long term disability ERISA attorneys at Riemer Hess LLC have been providing critical guidance to claimants like you for over 25 years. Call us to learn more about your options and get the guidance you need.

 

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