When Employer Provided Group LTD is Not Covered

While many people think that disabilities are typically caused by freak accidents, the majority of long-term absences are actually due to illnesses, such as cancer and heart disease. The loss of income can be so devastating that it forces some people to foreclose on their home or declare bankruptcy. Many employers offer insurance as part of an employee benefit package. Long-term disability (LTD) plans pay most of your medical bills if you become seriously ill or injured. However, the plans can vary greatly and some may not offer adequate coverage.

How Much Does Long-Term Disability Coverage Pay?

Group LTD is a valuable benefit to have, but there are a few questions that need to be considered:

• Are group LTD benefits taxes?
• Are commissions and bonuses covered?
• What is the definition of total disability?
• Is coverage transportable to other employers?

Group LTD typically offers employees a 60% salary continuation in the event of a long-term disability, up to a specific maximum benefit, such as $5,000 per month. Some employers may allow employees to purchase extra insurance from the same company, raising the total to 80%. Most policies do not replace commission or bonus income. Group LTD benefits are taxed just like regular income if the employer pays the premiums. The 60% income replacement is actually much less as a result of taxes. Few individuals can maintain their way of life if they have to live off less than 60% of their current income.

How Group LTD Policies Vary

Policies have different waiting periods before you can begin receiving benefits, which are 90 to 180 days. Some individual policies pay benefits for a specified period of time, such as two or five years, while others pay benefits until age 65 or your retirement age under Social Security. Not all individual disability income insurance policies are alike. Some policies pay benefits if you are unable to perform the duties of any occupation for which you are reasonably qualified by training, experience, and education. Others pay benefits if you are unable to perform the major duties of your job.

Purchasing Supplemental Disability Insurance

Supplemental disability insurance would help close the gap in coverage as they often cover 70% to 80% of your income. Most policies will cover you for several years or until you reach retirement age. An individually owned policy would allow more income coverage due to the tax-free nature of benefits. Income earned from commissions and bonuses may also be covered. Since it is individually owned, it cannot be canceled by the insurance company. It is important to purchase supplemental disability insurance while you are still healthy. It may be very difficult for you to find a provider that will cover you if you have a disability or serious health condition.

What to Look for When Purchasing Disability Insurance

Since disability plans can vary widely, it is important to choose one that will meet your needs. Some of the following tips may be helpful:

• Look for an “own occupation policy—If you can’t do your current job, the coverage will protect you.
• Look for coverage to age 65—This is when your retirement benefits will kick in.
• Figure out how long you can last before the disability benefits start—Get quotes for 90 days or 180 days so you can consider what works best for your financial situation
• Decide how much you want in benefits—Some policies will offer a benefit equal to 80% of your income
• Make sure you policy is guaranteed renewable—Your coverage is renewable to the termination date as long as the premium is paid on time.

How a Lawyer Can Help

Many private disability insurance policyholders find their former peace of mind shattered by a claim denial. They discover the disability insurance they believed they could rely upon isn’t there for them. If you or a loved one has been the victim of an unfortunate event that has left you disabled, you may want to consult with an experienced disability attorney to help you obtain the benefits you deserve.