When you receive disability income from multiple policies, the income you receive from one can offset the income you receive from another. While a long-term disability (LTD) policy typically provides income that compensates you for 60 to 70 percent of your regular pay, you can never receive more than 85 percent of your regular income. That means if you start receiving disability benefits from another insurance policy, your LTD disability benefits provider may lower the amount of income you receive from that policy.
Long-Term Disability Insurance
There are two common types of disability insurance: short-term and long-term. Short-term disability coverage provides you with compensation for three to six months after you have been injured or are unable to work because of an illness.
Long-term disability (LTD) insurance will generally replace 60 to 70 percent of your regular income, although every plan is different. Every plan also defines disability differently, so it is important to talk to your insurance representative or the benefits administrator for your group policy to find out how your insurance company defines disability.
Own-Occupation Versus Any-Occupation Definition
There are, in general, two different kinds of disability plans that companies offer: own-occupation policies or any-occupation policies.
With an own-occupation policy, you will receive benefits if you are unable to do the primary tasks of your regular job. However, when your employer offers this type of plan through your group policy options, there is usually a time limit for how long it will remain an own-occupation policy. Generally, after two to five years, the definition will change to any any-occupation policy.
An any-occupation policy is one where you only receive benefits if you are unable to do work at any job. If you have the ability to work at another job based on your training and background for commensurate income, then you would not qualify for LTD benefits under an any-occupation policy. If your own-occupation policy changes to an any-occupation definition, you must prove to the insurance company that you are unable to do any kind of work to continue receiving your LTD benefits.
There are own-occupation policies that never change their definition of disabled. However, these are usually only available if you purchase them individually. The benefit of taking this route, though, is that by paying your own premiums, your disability income is tax-free. If you receive coverage through your employer’s policy, you will have to pay taxes on your disability income.
If you are a high-income earner, you may want to strongly consider purchasing your own policy. The LTD insurance policy will cover up to 70% of your regular income and, because it should be tax-free, you will be able to get closer to your regular take-home pay.
How Other Insurance Policies Can Impact Your LTD Coverage
You can receive up to 85% of your regular income if you hold multiple insurance policies. Other policies that you may qualify for include programs like the CPP retirement pension. To qualify, you must have paid into these policies before you were disabled.
However, these plans can offset the income you receive through your LTD insurance provider. If you begin receiving income through one of these plans, your LTD insurance provider may decrease the amount of disability income you are already receiving.
Denials for Disability Benefits
According to the Huffington Post, CPP disability benefits were denied to 60% of applicants and were among the highest rejection rates in the world in 2014. While we do not have the statistics for the other private insurance companies, it is safe to reason that it is at least as high—and possibly higher—than that of CPP.
We want you to understand that the percentage of denials is high not to discourage you, but rather to reassure you that even though they are common, it is also common to appeal them. In fact, many people who receive benefits today began with a denial letter. However, they chose to fight the decision and were able to receive their disability benefits.
Because the process of filing an appeal is complex, however, you may want to consider speaking with a long-term disability lawyer who can evaluate the reason for your denial and explain your options for appealing the decision.
For a review of your claim and to take advantage of our free initial consultation, contact Preszler Injury Lawyers today at (416) 364-2000.