Long-term disability insurance companies use calculators to determine how much to pay their claimants. The calculator takes several key factors about the individual into account. By understanding how this calculator works, you can better anticipate the amount of long-term disability benefits you should receive.
However, not all claimants get paid as much as they should under their policy. At that point, they may need the assistance of an attorney. If you are having difficulty receiving long-term disability payments, reach out to the team at Pond Lehocky.
How Is Long-Term Disability Calculated?
These are the standard inputs that a policyholder will need to enter into the benefits calculator, and the significance of each one:
- Date of Birth: Your age affects your eligibility requirements as well as how long your payments will last. Most policies will pay a claimant up to age 65, so including your birth date will help us determine how many months of benefits your policy may pay out.
- Policy Type: Different disability policies have different coverage levels and benefit periods. Here, you will select one of the following options to describe your current coverage: long-term disability policy, short-term disability policy, or no current policy.
- Last Working Date: Many insurance companies will not pay long-term disability until the worker has been employed for at least three to six months. This is known as an elimination period. By entering your last working date, our firm can establish when your disability period began and the amount of possible benefits to which you are entitled.
- Last Benefit Payment Date (if applicable): We need to understand your benefits history, which could affect your current eligibility. If you have received disability compensation in the past, you will need to list the date on which you received your last payment.
Annual Salary: Your insurance company uses your annual, pre-disability salary to calculate the amount of your benefits. Most insurance policies pay a percentage of these earnings.
What Is Long-Term Disability Insurance?
Long-term disability insurance pays money to a disabled worker until they either retire or they reach a certain age. Other sources of disability benefits, like Social Security, may offset these payments. Importantly, a worker is usually not eligible to use long-term disability until they first exhaust any short-term benefits they have.
What Is the Difference Between Short and Long-Term Disability?
While short-term disability benefits provide almost immediate coverage for temporary disabling conditions, long-term disability pays for more serious illnesses or injuries that affect the worker over a longer period. Long-term policies also require longer waiting periods and stricter eligibility criteria.
Short-term disability may pay for up to about 12 months, while long-term benefits could pay for numerous years or even a lifetime. A standard waiting period for short-term disability benefits is about 14 days, and for long-term benefits, it is about 90 days.
What Is Voluntary Long-Term Disability?
Voluntary long-term disability is a type of optional employee insurance that is paid for by paycheck deductions. It exists to compensate a sick or disabled worker by replacing part of their income. The employee can usually file a claim if they have been out of work for 180 days due to their disabling condition.
If premiums are paid after taxes have been deducted from a worker’s paycheck, these claims will be tax-free.
Pros and Cons of Long-Term Disability Insurance
You may be uncertain whether a long-term disability insurance policy is right for you. Every individual’s circumstances are different, so you should take into account your personal and family finances in deciding whether to purchase coverage.
Advantages of Long-Term Disability Insurance
- Income protection: Experiencing a sudden accident or illness could spell tragedy. If you earn a substantial amount of money and then find yourself unable to work for an extended period, long-term disability benefits can step in to protect your earnings and avoid or minimize financial difficulties.
- Family peace of mind: Not only does having long-term disability provide a sense of financial security, but it also gives the rest of your family peace of mind in knowing that they, too, will not have to worry about money in the event of an accident. Also, your spouse will not feel pressured to get a second job, a different job, or go back to work if they are a stay-at-home spouse.
- Potentially tax-free benefits: It may be possible to pay for your long-term disability insurance policy with after-tax money, and the benefits you receive would then be tax-free. However, if you have a group disability policy, this may not apply because the benefits might be paid with pre-tax earnings. It is also possible that your employer has paid all or part of your premium, which means that you would not have tax-free benefits.
- No limits on how the benefits are used: Unlike some forms of employment compensation, like workers’ comp, there are no limits on how you can spend your long-term disability benefits. Employees receive cash payments and do not have to reimburse their insurer.
Drawbacks of Long-Term Disability
- Coverage may be expensive: Coverage may cost between 1-3% of your income, depending on such variables as your age, your health, and even your gender. The older you are, and the more hazardous your work is, the more expensive it usually is to have a long-term disability benefits policy.
- Pre-existing conditions may be excluded: Before purchasing a policy, you should understand whether there are any exclusions for pre-existing conditions. The insurer may exclude a specific condition, a body part, or a disability that results from particular types of activities.
- No payments if you are never disabled: Long-term disability only pays an employee who suffers a disabling injury or illness. If this has never happened to you, then you would not be able to file a claim, which means you will have paid potentially substantial amounts in insurance premiums for years with no payout.
Significant waiting period: Compared to short-term disability, the waiting or elimination period for long-term disability is much longer. If you become disabled before the expiration of this period, you will need to find some other way to pay your expenses.
Long-Term Disability FAQ
Our firm represents long-term disability clients in all 50 states. Here are answers to some of the questions we receive most often about long-term disability coverage:
Who Is Eligible for Long-Term Disability?
An employee who is already using short-term disability but who expects their condition to extend beyond the coverage period for these benefits could be eligible to file a long-term disability claim. They must be able to meet the definition of “disability,” which varies by insurance company.
To apply for benefits, the worker must first exhaust their short-term disability benefits. The worker must also wait out the elimination period, which is usually around 90 days. Finally, a physician must document the worker’s disabling condition and may need to periodically update the insurer about it.
How Long Does It Take to Receive Long-Term Disability Benefits?
Long-term disability is often coupled with short-term disability, in which case long-term coverage only pays once the short-term coverage ends. However, if an employee only has long-term disability coverage, then their coverage will be activated after the elimination period. This is usually anywhere from three to six months.
Is There a Time Limit on How Long Can I Receive Long-Term Disability?
Your long-term disability policy will dictate the duration of your coverage. Most claimants can receive payments for as long as they are disabled, although the insurance company may require them to periodically update their condition with additional documentation.
Some insurers impose what is called a maximum benefit period (also called a maximum indemnity period or maximum duration). This cuts benefits off after a certain amount of time.
Can You Be Fired While on Long-Term Disability?
You can lose your job while you are away on long-term disability. This is a shock to many workers since other types of coverage (e.g. workers’ comp) do not allow an employer to terminate an employee.
However, federal laws such as the Family and Medical Leave Act (FMLA) may protect you. If you have an employment contract, this may also prevent you from being fired.
Talk to a Disability Insurance Lawyer Today for Help
Long-term disability insurance can be complicated. From navigating the definitions of “disability,” to understanding the waiting period and ensuring you receive the right amount of compensation, you may need legal assistance. Find out why so many disabled workers trust Pond Lehocky to win them the benefits they deserve. If you have questions about your coverage or you are having trouble receiving payments, connect with us today.
