If you are not able to work and are currently covered under a Long-Term Disability (LTD) Insurance Policy, you will be eligible for monthly disability benefits that will amount to 50% to 80% of your previous income. LTD policies are categorized under two heads – “INDIVIDUAL PLANS” purchased in the open market and “GROUP PLANS” bought via an employer. For laymen, it’s never easy to understand both individual and group plans as the concepts are loaded with legal jargon, strict time deadlines and piles of exceptions.
If you have a plan to file an LTD claim, the most initial step is to request a copy of the LTD policy and an in-brief plan description from the human resources department through your employer. Those having individual plans should send a request in writing to the insurers for plan documents. Once you have received a copy of the summary plan description and policy, go through them carefully and pay special attention to the following important areas in order to understand the conditions that qualify for long term disability benefits:
How to Define Disability
The way ‘DISABILITY’ is defined in your policy will leave a huge impact on whether you are entitled to benefits. LTD policies are classified into broad categories – Any Occupation and Own Occupation.
Any Occupation: Under the title ‘Any Occupation’, disability is more strictly defined as you are required to demonstrate your incapability of performing any job that you, based on your educational qualification, training, and experience, reasonably qualify for.
Many LTD policies switch to “Any Occupation” from “Own Occupation” after a particular period of time – usually 24 months. There are two reasons that can lead to termination of disability benefits – either the definition of disability is more stringent now or your insurance company finds out that your condition has improved medically with respect to your ability to work.
Own Occupation: Under ‘Own Occupation’, you will be considered disabled after falling sick or sustaining an injury if that leaves you unable to perform – for profit or wages – the substantial or material duties of your current occupation.
From the above-stated definition, you are disabled under ‘Own Occupation’ only if you are not able to carry out your job-related duties.
Exclusions and Restrictions
Mental Status: Disability benefits for mental conditions and neuro problems are usually limited to only 24 months, with common exceptions applying to organic brain diseases and schizophrenia. Disabilities caused by alcoholism or drug abuse may be covered for a brief period of time or not at all.
Pre-Existing Conditions: “Pre Existing Conditions” are common exclusions in nearly all policies. These refer to any condition that prompted you to receive medical treatment in the last 90 days.
Duration of Benefits: Most LTD policies pay only for a particular period of time whereas a few continue to pay off until you are 65-year old. The maximum duration is clearly mentioned in the summary plan.
Waiting Period: It refers to the time when you’re disabled but don’t qualify for LTD benefits. Elimination period spans across 3-6 months and usually lasts for the length of your short-term disability benefits.
Taxability of Benefits: Taxability of your LTD benefits is subject to if you paid premiums with before-tax or after-tax dollars.
Social Security Disability: You will have to file SSDI benefits after receiving LTD. Your insurer will counterbalance your SSDI benefits against your monthly LTD benefits.
