What Is Private Disability Insurance (and Do I Need Coverage)?

If you are getting ready to file for disability benefits, you have encountered discussions about private disability insurance, ERISA plans, and Social Security disability. However, you might not really understand the precise differences between these policies and programs.

In this article, the disability insurance lawyers at Bryant Legal Group explore private disability insurance, its importance, and common issues that arise during a private disability insurance claim.

Private Disability Insurance vs. Group Disability Plans

Disability insurance coverage pays a monthly benefit when you are unable to work due to an illness, injury, or chronic medical condition. For-profit insurance companies sell these policies and plans to individuals and businesses. You can divide disability insurance into two main categories:

  • Private disability insurance: individuals purchase these plans and pay the premiums.
  • Group disability plans: employers provide this coverage as a fringe benefit for their employees

While these differences might seem unimportant, private and group disability insurance policies are handled very differently.

For example, if you have an employer-sponsored disability insurance plan, federal laws (especially ERISA, the Employee Retirement Income Security Act of 1974) will apply to your claim. That means you must appeal a claims denial with the insurance company before you file a lawsuit, and you cannot request a jury trial.

In comparison, state laws apply to private disability claims. In Illinois, you can immediately file a lawsuit once the insurer denies your claim, you can have a jury trial, and you can demand compensation if the company denied your claim in bad faith.

RELATED: Disability Insurance in a Nutshell

Social Security Disability Is Not “Disability Insurance”

Social Security Disability is not an insurance policy; it is a federal benefit. If you meet the Social Security Administration’s definition of disability, you may receive a monthly benefit and qualify for Medicare. This program has its own rules, procedures, and benefit systems.

Many long-term disability (LTD) insurance plans insist that you apply for Social Security benefits, and they will reduce your disability insurance payments by the amount you receive from the federal government.

Please note that Bryant Legal Group does not handle standalone Social Security disability claims.

Please note that Bryant Legal Group does not handle standalone Social Security disability claims.

How Does Private Disability Insurance Work?

When you selected your individual disability policy, you agreed to specific terms and conditions. Because policy language can vary dramatically, it is always a good idea to refer to your policy’s documents. And if you need help understanding its requirements, consult with an experienced disability insurance attorney.

Most private disability policies define “disability” in one of two ways:

  • Own occupation: You cannot do your actual job due to your health condition. Under some “own occupation” policies you can receive monthly benefit payments even if you return to another occupation.
  • Any occupation: You are unable to perform any type of work due to your health conditions.

Notably, some long-term disability policies convert from an “own occupation” definition to “any occupation” after a period of time.

There might also be other clauses and riders in your policy that affect your claim:

  • Elimination periods: The insurance company will not pay your monthly benefit until this waiting period expires. While most long-term disability waiting periods are between 90 and 180 days, they can be as long as two years.
  • Benefit periods: This period sets a limit on how long you can receive disability insurance benefits. For short-term disability, it might be a matter of months. Some LTD policies will pay benefits until you reach retirement age.
  • Cost-of-living adjustments: These riders allow for incremental increases in your monthly benefit.
  • Residual benefits: In an “own occupation” policy, this provision allows you to receive a benefit if you return to a different line of work and earn less money.
  • Pre-existing conditions and other exclusions: Some private disability policies will exclude pre-existing conditions and specific diseases from coverage. If you have a potentially disabling condition, it is in your best interest to carefully review these clauses.

Our disability lawyers can help you understand the terms and conditions of your policy. Many highly compensated professionals even consult with us when they are evaluating their individual policy options—helping them select coverage that protects their long-term financial goals and interests.

RELATED GUIDE: Disability Insurance Claims Roadmap

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I Have Group Disability Coverage. Do I Need an Individual Policy?

Many professionals decide to purchase supplemental private disability coverage, even if they have an employer-sponsored disability insurance plan. Consider this: the average surgeon earned $252,040 (or $21,003.33 per month) in 2019, according to the Bureau of Labor Statistics. If your group disability plan caps your monthly benefit at $7,500 per month, you are facing a massive income deficit unless you purchase additional coverage.

However, not all group and private disability insurance policies work well together. If they have competing terms and conditions, you might end up with unwanted complications and difficulties when you file a claim. To make sure that all your policies complement each other, it is best to consult with an experienced disability insurance lawyer.

Bryant Legal Group: Helping People Navigate Their Private Disability Claims

At Bryant Legal Group, our practice focuses on disability insurance law. We have fought for disabled professionals across Chicago and Illinois and have earned a reputation for our practical approach, sophisticated tactics, and stellar client experience. We have recovered millions in benefits for our clients, and we can help you understand your private disability insurance options and claim procedures.

To schedule your free consultation, call us at 312-561-3010 or complete our online form.

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.

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