There鈥檚 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 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.
An example of an 鈥淥wn Occupation鈥 definition of disability is as follows:
The term 鈥渕aterial and substantial duties鈥 is typically defined as: 鈥渄uties normally required for the performance of your regular occupation; and which cannot be reasonably omitted or modified.鈥
Learn more about variations in own occupation definitions.
Practical Tip: Be mindful of the definition for the term 鈥淥wn Occupation鈥 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 鈥渢he occupation you are routinely performing when your disability begins."
Learn more about own occupation definitions.
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 鈥淎ny Occupation鈥 definitions of disability include the following:
Generally speaking, you are 鈥渞easonably fitted鈥 for an occupation if you: (1) have the physical and mental ability (the 鈥渇unctional capacity鈥) 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 鈥渞easonably fitted鈥 if she doesn鈥檛 have the physical or mental ability to do them, or if few such jobs exist in her area.
Additionally, in the second example, the 鈥淎ny Occupation鈥 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 鈥渄isabled.鈥
For example, prior to your disability, you worked as a stock broker earning $40,000 per month. You are still considered 鈥渄isabled鈥 from 鈥淎ny Occupation鈥 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 鈥淲orking While Disabled鈥 below.
Learn more about any occupation definitions.
Examples of hybrid definitions of disability include the following:
鈥淵ou are considered Disabled if, solely because of Injury or Sickness, you are:
After Disability Benefits have been payable for 24 months, you are considered Disabled if, solely due to Injury or Sickness, you are:
Or:
鈥淵ou are considered Disabled if:
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 鈥淎ny Occupation.鈥 This may involve both updated testing and reports/statements from your treatment doctor(s).
Learn more about hybrid definitions of disability.
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 鈥渄isabled鈥 throughout the entire Elimination Period for benefits to become payable.
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 鈥渞egularly working a minimum of 30 hours per week.鈥
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.
The definitions of these terms vary. For example:
Some LTD policies contain an exception to this rule. For instance, your LTD policy may state that 鈥淩egular Care鈥 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.
Other policies 鈥 mainly Individual Disability Policies 鈥 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:
This amount will be your monthly disability payment.
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 鈥淢onthly Earnings鈥 or 鈥淧re-disability Earnings.鈥 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 鈥淧re-disability earnings鈥 may not include your bonus or overtime pay.
Common examples of the definition of 鈥淢onthly Earnings鈥 or 鈥淧re-disability Earnings鈥 include:
Practical Tip: Given the variation in the way 鈥淢onthly Earnings鈥 or 鈥淧re-disability Earnings鈥 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 鈥淢onthly Earnings鈥 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.
When calculating the amount of your disability benefit, you should keep in mind that most policies contain a 鈥渕aximum鈥 benefit amount. For instance, your LTD policy may provide for a benefit in the amount of 60% of your monthly earnings 鈥 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 鈥減re-disability earnings.鈥 For example:
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.
Offsets typically found in long term disability policies include, without limitation:
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.
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:
In contrast to group policies, Individual Disability Income (鈥淚DI鈥) 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 鈥淚njury鈥 as opposed to a 鈥淪ickness.鈥 And, sometimes in the event of a "sickness" the benefit payable after age 65 may be reduced.
Some Mental Illness Limitations contain exemptions for certain mental conditions. These exemptions often include:
Examples of Mental/Nervous Limitation provisions include the following:
You should take note of the subtle differences in the above provisions. The first provision states that the 鈥淢ental Illness Limitation鈥 will apply if your disability is 鈥渃aused or contributed to by鈥 a mental illness, where as the latter provision states that the 鈥淢ental Illness Limitation鈥 will apply if your disability is 鈥渄ue to a Mental or Nervous Disorder鈥︹
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 鈥淢ental Illness.鈥 For instance, 鈥淢ental Illness鈥 can be defined simply as:
Or it can be defined as:
There is another subtle difference here that could have a big impact on your disability claim. In the first example, 鈥淢ental Illness鈥 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 鈥淢ental Illness鈥 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.
These conditions often include:
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.
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鈥檚 鈥渓ook back period鈥 and 鈥減re-existing condition waiting period.鈥
The 鈥渓ook back period鈥 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 鈥減re-existing condition waiting period鈥 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:
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鈥檚 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.
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 鈥淭ermination of Disability Benefits鈥).
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 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.
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: 鈥淲e 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.鈥 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:
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: 鈥渢he monthly benefit payable is the gross disability benefit reduced by Other Income Benefits and 50% of your Disability Earnings.鈥
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.
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.
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 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鈥檚 name, and policy number (if known).
A typical Notice of Claim provision will state:
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.
A standard policy language will state:
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.
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 糖心直播 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.