What Is Not Covered by Long Term Disability Insurance?

More and more people are investigating long term disability coverage these days and with good reason; a study conducted by the Council for Disability Awareness, reports that one out of four 20 year olds will have a long term disability before they reach 65 years of age. Moreover, the average time they will be out of work is over two years. Long term disability insurance is typically offered through employers, but individuals can also buy it on their own.                                                        

The Basics

Long term disability coverage is provided through private insurers and is designed to provide income for an extended period of time if the policy holder is unable to work. Initially, it must be distinguished from government funded programs; worker’s compensation, for instance, or Social Security Disability (SSD).  As such, there are a great many options in coverage and benefit levels. Generally speaking, long term disability picks up where short term disability coverage ends.

Although short term disability coverage can extend for as long as two years, a NY long term disability lawyer can explain that six months is more typical. New York is in the very small minority of states that provide certain workers short term disability options.

Most long term policies have what is called an elimination period, which is merely a different term for waiting period. Most are three or six months and many policyholders choose a waiting period to coincide with their short term policy term. Typical long term benefits provide up to 60 percent of the person’s salary until the person can return to work or for the number of years stated in the policy, which in some cases is until retirement age.

Policy Exclusions

Most insurance policies have clauses that allow the carrier to deny coverage under certain conditions or circumstances. Typical exclusions in long term disability policies include:

• Self-inflicted injuries or illnesses
• Acts of war or consequences of armed service
• Criminal offenses

It is important to read a policy to understand fully the coverage offered.

Fully Disabled or Partially Disabled

A major issue in coverage is a consideration of what the policy holder is no longer able to do. Some policies will pay benefits if the individual can no longer perform the functions of their current profession; other policies anticipate the person to accept any sort of work that they can do even if their income is considerably less, while yet others pay a proportionate amount based on the difference in income. For example, if a person can earn 40 percent of their pre-disability income, they will receive 60 percent of the maximum benefit. The policyholder should look for language such as “own occupation” and “any occupation.”

Work Related Injury

Long term disability benefits are not payable to those injured at work. Worker’s compensation is the remedy for an employee who is injured as a result of an accident while on the job or who contracts an illness or disease due to the requirements of their job.

Social Security Offset

Most long term disability policies require the claimant to pursue SSD benefits. If the claimant is successful in receiving SSD benefits, the long term monthly benefit amount will be reduced by the amount of their monthly SSD benefit check. Currently, the SSD system is overwhelmed with claimants and the application process is complicated. It is not unusual for SSD applicants to wait many months and even years before they are approved. Back benefits are available through SSD, dating from when the individual’s disability began. However, most long term policies require a reimbursement to the carrier when this lump sum is received.

What the Insurance Company Says Is Not Covered

While most policyholders have a sense of security in having a long term disability policy in place, that can quickly turn to frustration when the company denies their claim for benefits. Unfortunately, denials are becoming more and more typical. Insurance companies are in business to earn a profit and are not always objective and impartial. Among the commonly given reasons for insurance companies to claim a policyholder is not covered are:

• The medical records do not support a disability determination; records have to be clearly written and medical evidence must be documented. Physicians are not always the best at providing details of physical and mental limitations and insurance companies often misinterpret medical records. Additionally, it is not uncommon for the insurance company to have an incomplete medical history for the claimant.
• The claimant is not “disabled;” each policy has its own definitions regarding disability and specific exclusions. For instance, certain policies initially consider a claimant disabled if they cannot perform their “own occupation,” but after a certain period of time they remain disabled only if they cannot perform the duties of “any occupation.”
• The claimant is able to perform the duties of their occupation; this occurs more often in sedentary occupations where the insurance company may bring in a vocational expert who may state that despite the claimant’s limitations, they can do the job.
• The claimant has a mental condition; most long term policies either exclude mental conditions or limit coverage. Depression and anxiety are often accompanying symptoms of disability, but insurance companies may try and focus on these as the cause of the disability and thereby limit their liability for coverage.