A Long-term disability insurance policy is a valuable resource for employees who are unable to work for an extended time due to a nonwork-related illness or injury. Long-term disability coverage is offered by private insurance companies. It’s often provided by an employer as an added benefit offered to workers, but long-term disability policies can be purchased by individuals as well.
The federal government operates a different long-term disability program which we know as Social Security Disability Insurance (SSDI or SSD). While SSDI and private long-term disability insurance share some similarities, the two programs are significantly different from each other in important respects.
The attorneys at Liner Legal Disability Lawyers want to ensure that our clients and potential clients understand all there is to know about how long-term disability insurance works, whether the disability benefits are provided by a private insurer or by the federal SSDI program. If you have questions, call us today for all the answers you need.
Long-Term Disability (LTD) v. Social Security Disability (SSD or SSDI)
Both LTD and SSD have advantages and disadvantages for employees. Let’s break them down into separate categories so you can better see the plusses and minuses of each program.
Advantages of Long-Term Disability (LTD) for Employees:
Policy premiums may be paid by the employer — Long-term disability is often sponsored and paid for by employers, so the employee does not pay any premiums for the coverage. Unlike LTD policies paid by employers, Social Security Disability Insurance and Medicare premiums are paid by every employee and employer, each paying 50%. Self-employed workers pay 100% of the cost.
Coverage terms are customizable — If an individual wants to buy a personal policy, they can choose among a wide range of features that can be customized to fit their own needs.
For example, an LTD policy can specify that the coverage will pay benefits when the policy holder is unable to do their own occupation, or when they are unable to do any occupation. The difference is that under the “own occupation” terms, a person could be injured in such a way that they are prevented from continuing in their usual work, like a surgeon who loses a thumb, or a trial lawyer who loses their voice. But they can engage in different work that still provides them with an income.
If the LTD policy covers “own occupation,” the benefits will continue to be paid even if the policy holder engages in a different occupation and earns a good income. If the policy coverage is for “any occupation,” then the benefit payments would cease if the insured person performed any gainful employment. The greater “own occupation” coverage would come at a higher premium cost, though.
Social Security Disability Insurance offers only “any occupation” coverage, meaning that benefits are not paid if the SSD claimant can perform “substantial gainful activities” doing any job.
Shorter Elimination Time than SSDI — Both LTD and SSDI require the person claiming benefits to wait a set amount of time before benefits are paid. Social Security Disability has a 5-month waiting period, starting to issue payments only in the sixth month after SSD determines the disability began. LTD also has a waiting period that is called the “elimination period,” during which no benefits are paid. The length of the LTD elimination period is selected by the policy holder when they choose their policy terms. However, private insurers are in business, and choosing a shorter elimination period has a direct impact on the amount of the premium. Longer elimination periods lower the premium.
LTD Pays Even If You Get SSDI Benefits — Another important advantage LTD offers to employees is the guarantee that the full benefit will still be paid even if the policy holder receives SSDI benefits. For example, if you own an LTD policy that pays a monthly benefit of $2,500 if you become disabled, the benefit payments will begin after the elimination period elapses. Suppose you also file for SSDI payments and you are approved for a monthly SSDI benefit of $1,700 each month. As far as SSDI is concerned, that is the maximum benefit for which you qualify.
But your contract with the LTD insurer requires a payment of $2,500 every month. In that case, the LTD insurer will pay the $800 difference in addition to the $1,700 SSD benefit your received.
Note, though, that the LTD policy will probably require that the policy holder apply for SSDI benefits as a condition of receiving the LTD benefits. If you are approved for SSDI benefits, the insurer will only be liable for the difference between your SSDI benefit and the policy benefit amount.
The LTD policy will also include a reimbursement requirement aimed at recovering any overpayment. SSDI benefits usually take many months to be approved. Then, once approved, the government will pay a lump sum covering the back-benefits to which you were entitled while your application was pending. Because your LTD insurer will usually have been paying full benefits throughout the time you waited to hear from SSDI, the policy usually requires the policy holder to return the money they received that exceeded what would have been paid if the SSDI back-benefits were paid when they were owed.
Liner Legal Represents You in Long-Term Disability Policy Disputes
If you have a LTD and your insurer denies benefits or disputes your benefit amount, or if they demand an unfair or inaccurate reimbursement, contact us at Liner Legal Disability Lawyers. We represent LTD policy holders in their disputes with LTD insurers. Don’t be intimidated by the large size of your long-term disability insurer.
Your rights are important to us. Liner Legal will fight to get you the benefits you deserve, whether they are benefits you deserve from Social Security Disability or from a private LTD policy.