Disability & Downsizing

Just as most larger companies provide health insurance for their employees, they also provide coverage under a group long term disability ("LTD") plan . When a person leaves a company, for example when lay offs occur in our downsizing economy, coverage under the employer's group LTD plan ends.

There is no COBRA equivalent for continuing coverage under an employer's LTD plan. However, most LTD plans provide a participant with the opportunity to convert to coverage under an individual policy upon leaving the company. The ability to obtain a converted policy is frequently easier than applying for an individual policy in the open market.

An individual policy is usually superior to coverage under an employer's LTD plan. Unlike a group LTD plan, an individual policy is not subject to ERISA. ERISA is a federal law that precludes jury trials and imposes other litigation restrictions that make it more difficult for a claimant to obtain LTD benefits. Therefore, unless the prospects for future employment are exceedingly dismal, conversion rights should be exercised upon leaving a company.