Long Term Disability Insurance

Although it is less well known than life insurance, most experts agree that disability insurance is just as important. And while most people have insurance that covers their medical expenses in the event they become sick or injured, they are not prepared for the lost wages that accompany the inability to work.

Though the terms of each plan vary depending upon the policy, disability insurance is a contract-based program intended to protect future income in the event the insured becomes disabled or unable to perform the duties of his or her occupation.

There are generally two types: short-term disability, for injuries or illnesses lasting less than 6 months, and long-term disability. Many experts contend that long term disability (LTD) insurance is the most important insurance one can own.

Potential sources of such programs include employers, unions, banks and credit unions, credit cards, and other forms of insurance policies available through private brokers. The terms of most such policies are governed by the Employee Retirement Income Security Act (ERISA). Oversight is regulated by the Employee Benefits Security Administration, under the auspices of the U.S. Department of Labor.

Typical LTD insurance replaces 50-70% of predisability earnings, usually with a monthly maximum that reduces the overall percentage of salary received. Some policies provide for up to 80% of monthly earnings. The payment amount is set at the time the policy is purchased.

As with any other form of insurance, insurance companies often try to get out of paying a claim. Many LTD litigators are of the opinion that some policy language is intentionally vague, and that certain categories of contention are built in. For example, mental illness, or certain conditions diagnosed by only subjective conditions, such as Fibromyalgia or chronic fatigue syndrome, may be points of contention.

Unlike the regulations that govern Social Security disability findings, the opinion of a treating physician in an LTD case is afforded no special consideration. Courts have ruled that reliance upon the opinion of an independent medical examiner is perfectly acceptable. Other arguable points may center around pre-existing medical conditions, or injuries from dangerous activities, as these are usually excluded from coverage.

Most policies define disability in terms of “own occupation,” “any occupation,” or “partial disability.”

“Own occupation” provisions usually state that a person unable to perform his or her own occupation due to sickness, injury, or pregnancy may collect benefits for up to 2 years until able to return to work.

“Any occupation” policies usually contain language to the effect that the disabled policy owner must return to work when able, even if not in the same capacity as before. In other words, the policy owner must be disabled from all occupations. The length of payout varies by policy, some for 5 to 10 years, and some up to age 65, with the latter being preferable.

A partial disability results if a person is working at their own occupation but unable to earn more than the “own” or “any” levels.

Still another point of contention lies in the definition of “own occupation,” because many policies provide that it is not limited to a specific job with an employer, nor to even a specific area of specialization, interest or expertise within the general occupation. Instead they look to the essential tasks, skills, knowledge and abilities generally required to engage in a particular occupation.

There may be other provisions that affect benefit amounts. A person who works while disabled may still be entitled to benefits, but subject to offset. Most policies also provide for an offset for other forms of income, including Social Security Disability, State or Disability, workers’ compensation or other group insurance coverage.

If a claim is denied, the policy owner has certain appeal rights. The first thing he or she must do is obtain copies of the plan details and all of the documents upon which the insurer relied in denying the claim. There are certain penalties if the plan administrator fails to provide the plan documents in a timely manner.

There are statutes of limitations, which may differ according to State legislation, or even contained within the contract itself. Certain medical examinations may be required to overcome the denial decision. The terms of the policy can be complicated, especially to persons who have recently become disabled, and may not be in the best position to fight for their rights. At these times a knowledgeable attorney is indispensable in developing the case and getting the denial reversed.

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