Unemployment Benefits & Legal Implications for Long-Term Disability Benefits
Applying for unemployment benefits and long-term disability benefits simultaneously may seem like a contradiction in terms, and generally a person cannot get both sets of benefits. The problem is that unemployment benefits are issued to people who are unemployed through no fault of their own and are actively seeking employment. In other words, they are capable of working. On the other hand, a policyholder will receive long-term disability benefits when their medical condition prevents them from working.
A government agency issues unemployment benefits, while an insurance company issues long-term disability benefits. Both the government agency and the insurance company may be skeptical of a claim upon finding out that the claimant is also seeking the other type of benefits. The government may think that they are not able to work and deny their unemployment claim on this basis. Meanwhile, the insurance company may think that a disability does not prevent a policyholder from working and deny their disability benefits claim on this basis. In limited situations, though, a person with a disability may qualify to get both types of benefits if the definition of disability in their policy permits.
Own Occupation Policies and Unemployment Benefits
There are two main types of disability definitions in long-term disability insurance policies: “any occupation” and “own occupation.” An any occupation definition generally provides that the policyholder will not be considered disabled unless their condition prevents them from performing the duties of any occupation. (This often means any occupation for which they are reasonably suited based on education, training, and experience.) In contrast, an own occupation definition generally means that the policyholder will be considered disabled if their condition prevents them from performing the core duties of their pre-disability occupation.
Unemployment benefits programs do not require a claimant to be willing and able to perform exactly the same work that they performed at their last job. They simply need to be willing and able to do some type of work. In this situation, therefore, a person with a disability who has an own occupation insurance policy might be able to recover both disability benefits and unemployment benefits. A person with a hybrid policy might be able to recover both types of benefits during the initial period before the policy definition changes to any occupation. A claimant still would need to meet other rules of the unemployment benefits program in their state, such as requirements related to the nature of their departure from their last job.
If a claimant successfully receives both unemployment benefits and long-term disability benefits, though, the insurance company may apply an offset to their disability benefits. This means that the disability benefits would be reduced by the amount paid each month to the policyholder in unemployment benefits. (Offsets for SSDI, workers’ compensation, and other types of benefits potentially available to a person with a disability also may apply.) Sometimes a policyholder may be able to pay an extra premium to avoid an offset. Otherwise, the net amount that they receive through a combination of long-term disability and unemployment benefits might be the same as if they received only long-term disability benefits.
