Monday, March 7, 2011

LTD Policy Offsets

Most group long term disability (“LTD”) policies reduce your benefit if you receive money from other sources of disability income, such as workers compensation and Social Security Disability (“SSD”). If you are paying for group LTD disability coverage, then you should have it reviewed by an attorney to ensure it is worthwhile.

Most group LTD policies provide for a benefit equal to 50-67% of your salary. If your salary is $80,000 a year, a 60% LTD benefit would be $48,000 or $4,000 a month. If you have a child, the maximum SSD benefit could equal about $4,000 a month. Therefore, it is possible that your LTD benefit would be totally offset by your SSD benefit, and it makes no sense to pay for LTD coverage. In other words, group disability policies really misrepresent the disability benefit they provide due to offsets. Your annual Social Security earnings statement estimates your potential SSD and family benefits.

I represent a claimant with two group LTD policies. One is through her employer, and the other is through a professional associational, AICPA. The employer’s group disability policy offsets any benefit from any other group insurance coverage. This requires considering whether it makes sense to pay for both policies. For example, it could make sense if there is the belief that the AICPA is more likely to pay a benefit, or if there is a likelihood or going to work for another employer, whose LTD policy may not have such an offset. If the claimant were already disabled, then the issue would be whether an application should be filed under each policy, which might depend on whether they offer the same benefit.

It also makes sense to ask an attorney to review your group disability policy if you are leaving your current employer. Many group LTD plans allow employees to convert their LTD coverage to an individual LTD policy, and you can negotiate to exclude offsets, such as SSD, from the converted policy.

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