Frequently Asked Questions

Can I obtain partial benefits if I’m not fully disabled?

Whether you are entitled to receive partial benefits — generally referred to as residual benefits — is dependent on the coverage that you purchased. Residual benefits are not always automatically included in private disability insurance policies and tend to be offered as a supplementary rider. If you do not purchase supplementary “residual benefits” coverage, then you may not be eligible for residual benefits.

In any case, if your plan does include some provision for residual benefits, then you may be entitled to receive a portion of your total disability benefits in circumstances where you have not been rendered “fully disabled” but have still had your ability to work and earn impacted by your condition.

How does it work?

  • Residual benefits qualification can vary significantly, but as a general rule, it is measured by a percentage reduction in income or hours.
  • For example, if your total income has been reduced by 40 percent in the wake of your disabling injury, then you may be entitled to receive 40 percent of your total disability benefit (monthly) as a partial income replacement.
  • Thus, if you would have been entitled to $5,000 monthly disability benefits (for a fully disabling condition), you would be entitled to receive $2,000 per month in partial benefits.

It should be noted, however, that most insurers require that the impact of your partial disability meet a baseline percentage amount before you are entitled to receive residual benefits. If the impact of your partial disability on income is just five percent, for example, then you would likely be ineligible to receive any benefits.

How do I know if my condition qualifies as a disability?

Definitions of “disability” are determined by the disability insurance plan or policy. Policies tend to define disability into three fundamentally different categories: specialty specific own-occupation, own-occupation, and any-occupation.

Specialty Specific Own-Occupation

If your insurance policy includes a specialty specific own-occupation definition of disability, then you will be entitled to benefits if you can prove that your condition renders you incapable of substantially performing the primary duties of your own occupation in the specialty in which you perform it.

For example, if you work as a trial attorney, but your disability has damaged your cognitive abilities, then you may be incapable of meeting the cognitive demands required of a trial attorney and as a result should be entitled to benefits under the policy.

Own-Occupation

If your insurance policy includes an own-occupation definition of disability, then you will be entitled to benefits if you can prove that your condition renders you incapable of substantially performing the primary duties of your current occupation. For example, if you work as a financial analyst, but your disability has damaged your attention span and your ability to remain on-task for more than 10 minutes at a time, then you may be incapable of performing the complex, hourlong analyses necessary for you to perform your job as a financial analyst.

Oftentimes, insurers attempt to deny benefits in the own-occupation context by arguing that the duties of your current occupation can be different, and that the duties of your current occupation are not indicative of the “norm” in the industry.

Any-Occupation

If your insurance policy includes an any-occupation definition of disability, then you will only be entitled to benefits if you can prove that your condition renders you incapable of substantially performing the primary duties of any other condition for which you are reasonably qualified (and that constitutes “gainful employment’). This is a very strict definition of disability and can require a nuanced approach to overcome.

I receive benefits through an employer-sponsored disability plan, but the insurer denied my claim for disability benefits. How will that affect my dispute?

Most employer-sponsored disability plans — except for those sponsored by public employers and religious organizations — come under the Employee Retirement Income Security Act (ERISA), which creates an exclusive federal regulatory scheme for benefits claims and subsequent challenges.

ERISA was created with the intention of protecting plan participants from the abuses of plan administrators, but over time, ERISA has actually developed into something of a headache for the plan participants it was originally meant to protect. If your plan is ERISA-governed, for example, then you must fully exhaust your administrative remedies before pursuing civil action against the plan administrator or insurer — this can extend the timeline of the dispute and keep you in a vulnerable position for longer.

Additionally, ERISA preempts bad faith actions against insurers, thus eliminating a significant recovery option for insured plan participants whose insurers have mishandled their disability claims.

My insurer is offering to buyout my disability claim — is there any advantage to accepting a lump sum buyout?

In long-term disability situations, private disability carriers can make offers to buyout coverage so as to avoid having to payout benefits for the lifetime of the policy. When you accept a lump sum buyout, you must agree to forgo legal claims against the insurer for the benefits at-issue (and any related issues, such as a bad faith claim you might have against that insurer for how they mishandled the processing of your benefits). The benefits owed over the lifetime of the policy are negotiated and repackaged as a lump sum payment. If you accept the lump sum buyout, then you will not be entitled to receive monthly benefits payments.

Now, with that out of the way: is it worth it? Though it might seem like an unsatisfactory answer, the truth is that the attractiveness of a lump sum buyout depends on the circumstances of your disability claim and your own preferences.

Let’s clarify.

A lump sum offer for a buyout is less than the total present value of your maximum future benefits under your disability insurance policy. Whether or not the offer for a buyout is reasonable or “worth it” for you to accept requires complicated analysis. For one thing, disability insurance benefits are not static in nature. The insurer may conduct surveillance over time, and will absolutely expect you to update them on changes in your medical condition(s), your continued medical treatment, and any efforts to return to work. It is in the insurer’s best interest for you to improve and therefore to no longer be “disabled” under their policy, thus terminating the receipt of benefits. By negotiating a lump sum buyout, you don’t have to worry about whether the insurer will terminate your benefits at some later date — you can focus on recovery.

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