With optional insurance coverage—such as accident insurance, pet insurance, and disability insurance—there are two extremes of people. The cover-your-bases, plan-for-the-worst people opt in to every type of policy, trusting that it will be there if they ever need it, while the take-your-chances, pay-only-when-you-have-to people avoid all supplemental insurance policies, hoping that the money they save in premiums will be there for them if Man Holding an Insurance Policy Paper and Pointing at the Fine Printsomething happens. Most of us fall between the two extremes and will opt in to plans subsidized by our employers if the benefits seem worth it.

One type of insurance that some employers offer is long-term disability (LTD). The promise of coverage is that if you are injured or ill and cannot work for an extended period, your policy will pay much of your income. While this sounds good in theory, it’s important to understand how these policies work in practice before you put too much faith in them.

Common Benefits of Long-Term Disability Policies

Generally, LTD insurance pays a percentage of your income when you have been in an accident or have been diagnosed with an illness that makes it impossible for you to work for an extended period. Some policies will also replace the income lost if you must take a lower-paying job because of your disability. These wage-replacement benefits will last for several years but usually expire when you reach retirement age. Most policies cover any injury or illness that prevents you from working, but the five most common claims for LTD include:

  1. Musculoskeletal disorders
  2. Cancer
  3. Pregnancy
  4. Mental health issues
  5. Fractures, sprains, and strains

The cost of an LTD policy can vary greatly, depending on how much your employer contributes, the coverage, and how old you are. Premiums often increase the older you get. Some policies require a health screening before approving your coverage. Naturally, there are exclusions in every LTD policy. Those often include things like self-inflicted wounds, pre-existing conditions, and injuries incurred while committing a crime, such as driving while intoxicated.

Every Policy Is Different: Read the Fine Print

While the above provides a general outline of how LTD insurance works, the specifics of your plan depend on the terms of your policy. You should read and understand the terms before purchasing a policy. Some terms that can vary widely among policies include:

  • Benefit amount. LTD benefits will not cover your entire salary. Most plans replace between 60 and 80 percent of your monthly income, but this will be spelled out in the policy so you will know what to expect.
  • Elimination period. The elimination period is the time you must wait until your benefits kick in. This can range from 30 days to a full year.
  • Benefit period. How long your benefits will last is another big variable between plans. Some plans will cover you two years, while others can extend to ten years. However, most plans will stop once you reach retirement age.
  • Definition of disability. Each LTD policy will spell out when they consider you to be disabled. A generous policy will cover you if you cannot do your own job, even if you could do another kind of work. A stricter policy will only cover you if you cannot do any kind of work because of your injury or illness. Other policies fall somewhere between. 
  • Premium. Generally, the higher your monthly premium is, the more generous your benefits will be, but this is not always true. You might also have options with the same insurance company to lower your premium for less coverage.

The most common reason for a claim denial is that you did not meet the terms of your policy, so you should understand what you are buying when you get a policy.

When Benefits Are Denied

If your LTD policy was provided by a non-governmental employer, the claims and appeals processes are governed by the Employee Retirement Income Security Act (ERISA), which imposes strict timelines and tight restrictions for filing an appeal. If you have been denied the LTD benefits you were counting on, your first step should be to talk to a lawyer who handles ERISA claims. Monast Law Office can answer your LTD questions and help you appeal a denial if it is warranted. Contact our office to request our free guide to ERISA claims and to learn more about your appeal.

James Monast
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Board-Certified Workers’ Compensation Attorney in Columbus, Ohio