If you find yourself unable to work due to a disability and are covered by a long-term disability insurance policy, you might be entitled to a monthly benefit of 50-80% of your prior earnings. Long-term disability (LTD) policies fall into two categories: group plans purchased by an employer or individual plans bought on the open market. Both group and individual policies can be challenging to understand and are littered with lots of legal jargon, strict deadlines to meet, and exceptions upon exceptions upon exceptions.
If you are considering filing a LTD claim, the first thing you want to do is request a copy of the actual policy and the summary plan description from your employer’s HR department or the insurance carrier you purchased your individual policy from. If you have an individual policy, you will want to request the documents in writing.
Once you have a copy of the policy, you will want to review it very carefully, paying special attention to the plan’s provisions in these areas:
The Definition of Disability
How your policy defines disability can have a significant impact on whether you qualify for benefits or not. LTD policies fall into one of two broad categories and then may have additional restrictions beyond this.
The first category is “own occupation”. What this definition means is that you are no longer able to perform your own job. You may be able to perform other jobs, but due to your disability can no longer perform your current job.
If you are an airline pilot who is medically unable to handle the physical and/or mental requirements of such a demanding job, you are categorized as disabled even if you would be able to perform another less strenuous job.
The second category is “any occupation”. These policies are more strict as you need to demonstrate that you are incapable of performing any job that you are reasonably qualified for based on your levels of education, training, and job experience.
An airline pilot is who is no longer able to pilot an airplane due to back pain that prohibits them from sitting for long periods of time would not be disabled under a “any occupation” policy if they are still capable of performing other jobs such as working customer service in a department store or waiting tables in a restaurant.
A lot of long-term disability insurance policies change from “own occupation” to “any occupation” after a given amount of time passes.
A disability benefit may be terminated because of the definition of disability becoming more strict (changing from “own occupation” to “any occupation”) or because your insurer determines that you have experienced medical improvement related to your ability to work.
Exclusions and Limitations
Pre-existing conditions. Almost every LTD policy includes exclusions for pre-existing conditions. These are usually defined as any condition for which you have received medical treatment in the previous 90 days.
Waiting period. In most LTD policies this is called an “elimination period”. During the elimination period you are disabled but not eligible for LTD benefits. The elimination period is often 3-6 months and usually pairs with the length of your short-term disability benefits.
Duration of benefits. Some LTD policies pay benefits until you turn 65 while others pay for a set number of years. Your plan summary should clearly define this.
Mental conditions. LTD policies will often cap benefits for mental conditions at 18-24 months. These are defined as mental or nervous conditions and do often list exceptions such as schizophrenia.
Taxability of benefits. Whether your long-term disability benefits are taxable or not depends on whether your premiums are paid with before-tax or after-tax dollars. If they are paid with after-tax dollars, then the benefits are not taxable. The opposite is true in the case of premiums paid with before-tax dollars.
Social Security Disability. You will likely be required to file for Social Security Disability Insurance (SSDI) benefits if you receive LTD. Your insurance company will offset your SSDI benefits against your monthly LTD amount.
Who Determines Whether or Not I am Disabled
Group health insurance policies fall under a federal law known as the Employee Retirement Income Security Act (ERISA). ERISA states that LTD insurance companies themselves decide whether you are approved or not for benefits. This often results in cases being initially denied.
Make sure that you carefully follow all of your insurance carrier’s instructions for filing your initial claim to avoid having your claim automatically denied and delaying the process unnecessarily.
Appealing a Denial
Read the rules of your policy for filing an internal appeal and make sure you meet all necessary deadlines. You must go through the internal appeal process before you can take the case into federal court to fight it.
ERISA law states that federal judges are generally limited to reviewing the “administrative record” and will not consider any evidence that was not presented during the internal appeals. For this reason it is vitally important that you file your internal appeal with all medical evidence of your disability.
For this reason, it is highly recommended that you hire a long-term disability attorney to help you through the administrative appeals process and put together your administrative record. Making sure everything is done right from the beginning will help to ensure that if your case does need to go before a judge, you will have the best possible chance for success.
Some long-term disability attorneys will even only charge a fee if you win your case, so there really is nothing to lose by having appropriate legal counsel on your side.