Although long-term disability (LTD) insurance can provide an invaluable form of financial security to families who endure the disability of a primary wage earner, many people do not obtain such coverage. The reasons for delaying or forgoing such an investment range from concerns about the cost to a general sense that debilitating injuries and illnesses only happen to other people.
Statistics regarding the number of adults (over age 18) in the U.S. who experience a disability reveal that sensory and physical disabilities are fairly common. The Centers for Disease Control and Prevention (CDC) report the following number of disabilities for non-institutionalized adults in the United States:
- Hearing Disabilities: 37.6 million (16 percent of adults)
- Vision Disabilities: 20.6 million (8.8 percent of adults)
- Inability to walk ¼ mile (or very difficult): 17.2 million (7.3 percent)
- Physical functioning difficulties: 35.2 million (15 percent)
- One basic action difficulty or complex activity limitation: 75.4 million (32.9)
While these numbers should dispel the notion that the probability of suffering a long-term disability is extremely low, this risk increases exponentially as people age. Over 61 percent of non-institutionalized individuals age 65 or older have basic action difficulties or complex activity limitations according to the CDC. Following are answers to key questions about disability insurance policies and claims in this three-installment blog post:
What is a long-term disability plan?
The function of long-term disability insurance is to protect working individuals from an interruption of income caused by a disabling injury, psychological disorder, or illness. However, an insured’s policy might specify a distinct definition for disability, so a careful review of the language and provisions of the policy is important. An LTD policy will provide replacement of lost income but only in part. Under most LTD policies, an injured worker can obtain 60-80 percent of his or her average income prior to becoming disabled. While policies vary in terms of the duration of coverage, long-term disability might begin six months after an individual becomes unable to work and continue until the age of 65.
Does state or federal law cover my long-term disability claim?
If you purchased your long-term disability coverage directly from the insurance company, your policy and claims under the policy typically will be covered by state law. When your insurance policy is provided by your employer, the Employee Retirement Income Security Act (ERISA), which is a federal statute, generally will dictate the rules and procedure regarding your insurance and any claims. While the initial objective of ERISA was to provide protection for employees from the risk of bankruptcy to pension plans, the law was expanded to include LTD plans provided by employers.
How does an ERISA long-term disability “plan” function?
If you are employed by a mid-to-large company, you might have an employer provided disability plan as part of your benefits package. If you have an ERISA plan, the plan administrator is required by federal law to provide information regarding fiduciary responsibilities, plan benefits, management, funding, grievances, and appeals. Under ERISA, the insurance company is permitted to interpret the terms of the policy although this is an extremely unfair arrangement.
Employees who have this form of policy should be aware that the documents provided by the HR department upon hiring probably did not include an actual copy of the LTD policy. While the employee might have been provided with some form of summary of benefits or an overview of the policy, the worker should request an actual copy of the policy and plan. Policies can vary substantially, such as the way the term “disability” is defined.
If you have questions about your disability insurance or your insurer has denied your claim, we might be able to help. We invite you to continue reading Part II of this blog post or speak to us if you have specific questions about your circumstances. My law firm represents policyholders in claims disputes in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.