Long-Term Disability

Those who experience a serious disability may not be able to work for an extended period of time. While some employees with disabilities are able to work with reasonable accommodations as defined under the Americans with Disabilities Act (ADA), many are unable to work at all.

If you cannot work because you are disabled, your options include workers’ compensation benefits, Social Security Disability insurance benefits, and long-term disability benefits. All of these options have limitations. For example, workers’ compensation benefits are only appropriate for people who become disabled due to an injury sustained on the job. Only employees with substantial work history who experience severe long-term impairments that preclude substantial gainful work are eligible for Social Security disability benefits. However, it doesn’t matter in this context whether work caused the impairment.

Some employers provide long-term disability insurance as part of a comprehensive employee benefits package. These are usually governed by the federal Employee Retirement Income Security Act of 1974 (ERISA). This law was designed to provide safeguards regarding employee benefits programs, including disability insurance.

If your plan is governed by ERISA and you have a dispute with your insurer about the benefits due to you, your current rights, or your rights to future benefits, you will need to exhaust administrative remedies before filing a lawsuit in federal court. Typically your insurance policy will contain language that sets a time limit for filing suit. ERISA is a very complex area of law, and it is important to consult a lawyer who specializes in ERISA as soon as possible if you believe your insurer is not living up to its obligations under the policy.

You can also purchase an individual long-term disability plan from an insurance agent. The benefits from these policies kick in if an employee loses income because of an inability to work for an extended period due to illness, injury, or accident. These individually purchased policies are contracts covered by state law. If you believe your insurer has failed to live up to its obligations under the policy, you may be able to file your lawsuit in state court, although the insurer may be able to remove the case to federal court based on diversity jurisdiction.

Long-Term Disability Insurance Coverage

There are many different long-term disability insurance plans available, and the language of a particular policy determines the conditions for payout and the conditions under which you can receive benefits. They are likely to contain exclusions for such things as pre-existing conditions. Whether a condition counts as a “disability” will be defined differently in each case. Some policies are only paid over a defined period, such as 2-10 years. Other policies pay the beneficiary of the policy until he or she reaches 65, the age of retirement.

Typically, employees must work full-time (30-plus hours a week) for the employer for a certain period of time before their coverage kicks in. Long-term disability insurance usually pays an employee a percentage (50-75%) of his or her salary after short-term disability insurance benefits expire.

Historically, many companies paid the full amount to cover their employees for long-term disability. At this point, however, long-term disability insurance may be fully paid by the employer, fully paid by the employee, or shared between them. Different tax implications apply to these situations.

While some policies pay disability benefits if the disabled employee cannot work in his or her current position, others expect workers to take any job that they are able to do even if it isn’t in the field preferred by the employee. This term can substantially affect your right to receive benefits.