Our video shares what we consider to be ten important features to consider when choosing long term disability (LTD) insurance. There are two basic types of coverage: an individual disability insurance policy or a group disability insurance plan.
What are the differences? Do they offer the same protection?
The most prevalent type of LTD insurance is group disability coverage through an employer. Even so, most employees are not aware of the limitations and hidden costs of group disability coverage, or the amount of coverage they will actually get.
Individual disability insurance (IDI) is a policy that you privately buy from an insurance agent. This type of insurance offers far better income protection and flexibility of coverage, when compared to group disability benefits provided through your employer. Accordingly it is also more expensive.
Who needs IDI?
Disability Insurance for Professionals, Physicians, Specialists
Doctors, dentists, lawyers and many other skilled or highly paid professionals and business owners invest a great deal of time and resources to train for and establish their careers.
Should their ability to practice medicine, law, or other profession become limited due to disability, they often face different income protection needs than other employees.
Also, high wage earners who have group disability benefits will often supplement the group coverage by purchasing additional individual policy.
For a free legal consultation, call 800-562-9830
How an IDI Policy Provides Better Income Protection
With individual policies you can “stack” coverage tailored to your situation. An insurance company’s base policy is enhanced with optional riders (policy add-ons) that add customized coverage to fit your needs.
In some policies, benefits normally sold as riders are included as base coverage. This varies with each insurance provider. In either case, the enhanced coverage will substantially increase the policy’s cost.
An Individual Disability Insurance Policy and a Group Disability Policy are Written Differently
The video above discusses potential features of disability plans, including how different definitions of disability and policy exclusions can have a big impact on the coverage you get and benefits you are paid.
With a private disability insurance policy, you are much more likely to find the most advantageous definition of disability (“Own Occupation”) with the fewest gaps in coverage.
The items below explain the differences between group and individual disability insurance policies for these and other basic features.
Definition of Disability:
If you are a skilled, highly paid specialist, your income protection needs are different. Often the need for private insurance is to lock in your special income level. This more expensive and benefit-driven category of policies is called “Own Occupation” coverage.
Own occupation definition of disability pays a claim if you cannot work in your specific occupation – not just any occupation.
“Any Occupation” coverage is what you generally find in group insurance plans. Most group benefit plans generally begin as own occupation and after 24 months the definition changes to any occupation.
The broader any occupation policies place you at a disadvantage, as the burden is on you to prove that you cannot perform any job you are reasonably qualified to do. This is why so many “short term” group disability benefits are terminated after two years. Insurers approach “any occupation” long term disability claims with the intent of finding any argument upon which to base a denial.
If you must purchase an “any occupation” policy, make sure it has the “salary percentage” provision where you must be able to earn at least 60 to 80% your former salary.
Portability:
As long as you pay the premiums, private disability insurance is yours and follows you even if your occupation and salary range change. Group coverage is tied to your employment, and cannot follow you if you change jobs.
Taxes:
Employer-provided group benefits are taxable to you when the employer pays the premiums.
With an individual disability insurance policy, benefits are not taxable (because you are paying the premiums with after-tax dollars).
Bonuses:
Group disability benefits are tied to your W-2 income or annual base salary. That is why the typical group disability plan covers a percentage of your base salary up to a fixed monthly cap, and will not cover bonus / commission income. If you are a commission or bonus-based employee, or a high income professional or a key employee with substantial income derived from bonus pay, group plans can severely undercut expected benefits.
Bonuses and commissions are covered in a private long term disability policy.
Riders:
You can add a host of different disability insurance riders to enhance the individual disability contract. Riders are additional coverage you buy to add to your base policy. Riders are not available with group insurance. You can always purchase an individual long term disability insurance policy to supplement your group plan.
You pay higher premiums for the enhanced coverage through an IDI policy in the hopes it pays off if you suffer a long term disability. There is always the question about the likelihood of an insurance company denying vs. paying a disability claim.
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What Happens if Your Claim Is Denied, After All?
Whether you will recover disability benefits at all, and if so, the amount you will be paid, depends on how much you know about your policy, your legal options and how you plan to protect your rights.
The insurer wrote the policy that you bought. They will also evaluate the claim and decide whether you are disabled. They control the money.
Truthfully, claimants are at the mercy of the insurance companies. These are billion dollar corporations with vast resources and the means to deny legitimate claims, in order to protect their own assets.
If your insurance provider has unfairly denied your claim for disability coverage, you must not give up. Contact a knowledgeable disability attorney without delay. With the right help in your corner, you can fight back and win.
Complete a Free Case Evaluation form now
Individual Disability Insurance Policy – State vs Federal Law
Also know that different standards of review and rules apply in disputes over an individual disability insurance policy vs. a group disability plan. The laws governing these two different types of coverage are vastly different.
If your group disability claim is denied and you wish to challenge the decision, you must appeal the claim according to federal ERISA regulations and procedures. ERISA laws favor the insurer, not the claimant. Basically you are appealing the denial to the same insurance company that denied the claim.
Read more about how ERISA can obstruct a group disability appeal.
If you buy your own individual policy, then federal ERISA does not apply. If your claim is denied, you are entitled to all procedural rights and remedies available to you in your state under insurance and contract laws. You also retain important rights, such as the right to a jury trial and the right to present new evidence and cross-examine any witnesses testifying for the insurance company.
Learn more about fighting a private disability insurance claim denial.
Our Disability Law Firm Holds Insurers Accountable Every Day
Marc Whitehead & Associates has built its reputation on assisting individuals with group and private disability insurance claim delays and denials. Our firm holds “big insurance” accountable to honor their promises.
To fully understand the relationship we have with our clients, please view our 100% Satisfaction Guarantee.
Ask Us About Your Claim Today.
If you were denied long term disability benefits, Social Security Disability or Veterans’ Disability Compensation, we are prepared to help you now. 1-800-562-9830
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