Long-Term Disability vs. Social Security Disability
A serious injury or illness prevents you from going to work. You are losing wages, but the expenses have not changed. Your recovery may be taking months longer than expected, or your condition may be permanent. Regardless, you need help and are considering applying for long-term and/or social security disability benefits. Though this may appear to be a simple solution, there are important facts to know before continuing down this path.
Long-term disability benefits are typically offered by employers to employees through a group plan. These private group disability plans are sold by an insurance company to the employer. If a worker becomes injured or unable to work, long-term disability benefits pay back a percentage of their lost wages. To qualify, you must meet the definition of disability under the plan purchased by your employer from the private insurance company.
By contrast, Social Security disability is a government-sponsored disability program. To receive Social Security disability, you must meet certain work credit requirements and the definition of “disability” under the federal laws and regulations.
Long-Term Disability May Require You to Apply for SSD
Most LTD plans require the employee to file a claim for Social Security disability. Many LTD insurance companies require this even if the employee would not qualify for SSDI. The reason is the insurance company wants to reduce the benefits paid to the employee under the terms of the LTD plan.
Approval for Social Security disability can take a year or longer. A mandatory five-month waiting period must also pass from the initial onset of the long-term disability. A payment would not be received until the sixth month at the earliest, but the approval process usually takes longer.
Since approval for Social Security disability can take more than a year, a beneficiary is usually given a retroactive, lump sum award at the time of approval. Retroactive awards compensate you for periods of benefits that were not previously paid. Depending on the amount of time at issue, these retroactive disability awards can amount to considerable sums.
Does Your Long-Term Disability Policy Have an “Offsetting Clause?”
It may be tempting to spend your Social Security disability insurance immediately. However, this can be a big mistake. Long-term disability plans often contain an “Offsetting Clause”. This clause states that, if you receive benefits for your disability from some other source, the amount of your long-term disability benefits is reduced by that amount. This reduction is called “offsetting.” If you receive a retroactive award from Social Security, this additional income may offset and reduce your long-term disability benefits.
For example, say your LTD benefits plan pays you $2,500 a month. The same program requires you to apply for Social Security disability, which ends up granting you an additional $1000 a month.
If your LTD policy contains an offsetting clause, the LTD insurance company would offset the Social Security disability benefits and reduce your LTD benefits to $1500 each month.
If you receive a retroactive Social Security disability award in this scenario, the LTD insurance companies may demand immediate payment for that amount. This is because the LTD insurance company did not offset the LTD benefits that were previously paid, which resulted in an “overpayment” under the terms of the policy.
Long-Term Disability Benefits Are Still Worth Pursuing
Even with an offset clause, long-term disability benefits are still worth pursuing for many disabled workers. If you are unable to return to work for the foreseeable future, you should apply for any benefits for which you may qualify. You should also educate yourself on the disability plans or programs and understand how they interact. You should also remember that private disability insurance is a business that is run for profit, and the insurance company’s goal is to maximize profits and reduce claims and benefits whenever possible.
Call our Experienced Long-Term Disability Attorney
If you have questions about long-term disability insurance, call the Law Office of Kevin J. McManus at 816-203-0143. If you have been denied benefits, we will review your denial letter for free. You can also download our free long-term disability book, Danger: Proceed at Your Own Risk. This guide shares insights regarding long-term disability appeals and why you should hire our long-term disability lawyer in Kansas City to handle such an appeal.