Disability FAQ
What's the difference between Short and Long Term Disability?
Disability Insurance provides funds when you are unable to work due to disabling injury or illness. The primary difference between short and long term policies is a) the period of time before payments are made following a disabling incident (qualifying period) and b) the length of time payments are made. As the name implies, Short Term Disability Insurance will cover the early stages of a disability. The benefits can begin as early as the first day of an injury and are payable for a limited period of time, typically three or six months. Long Term Disability usually has a three or six month qualifying period before benefits begin. Benefit payments can continue all the way up to retirement age as long as the individual continues to qualify as disabled.
What happens to my group disability insurance if I leave employment?
If you insured under a group plan, both Short and Long Term Disability Insurance usually end with the termination of employment. However, Long Term Disability Insurance may contain a conversion provision depending on certain termination conditions. In Minnesota, Disability Insurance is not subject to the Minnesota Continuation regulations.
Are my disability benefits taxable income?
Most voluntary short term disability and long term disability plans are paid for with after-tax dollars. If that is the case, then the disability benefits are not taxable. If your employer is providing the disability insurance as a benefit at no cost to you, then the premiums may be paid for with pre-tax dollars. In that case, the benefits received become taxable income to the claimant. You should contact your Benefits Administrator to verify how premiums are being paid.
Why should I enroll in Long Term Disability Insurance?
Disability is more common than most people think. Three in 10 workers entering the workforce today will become disabled before retiring. One in seven workers can expect to be disabled for five years or more before retirement. Also, disability causes nearly 50% of all mortgage foreclosures, while only 2% are caused by death. To learn more, visit The Council for Disability Awareness (CDA). The CDA is a non-profit group formed in 2005 to help the American workforce become aware of the growing instances of disability and its financial consequences.
If an employee terminates employment due to a disability, can they still file a claim?
The disability claim is based on the date of the onset of the disability. If the employee was still actively-at-work and premiums had been paid when the disability occurred, the employee should file a claim. Even if the employee subsequently terminates employment, they were eligible to file a claim based on the date of the disability. In most cases, the claimant should continue paying the premiums until the elimination period has been satisfied.
How long will my Long Term Disability benefits be paid?
The benefit period is defined in the policy. It is common for group long term disability policies to provide benefits to Social Security Normal Retirement Age. If you become disabled after age 60, there may be an extension of benefits beyond age 65.
How is disability defined in order to qualify for benefits?
A disability can be the result of an injury, a sickness, or a pregnancy. The policy defines disability using an occupation test, an earnings test, or both. The occupation test states that if you are unable to perform at least one of the material duties of your regular occupation and are under the regular care and attendance of a physician, you are considered disabled. This "own occupation" definition usually applies for a specific period of time, i.e. 36 months. Following the "own occupation" period, you will continue to be considered disabled if you cannot work at any occupation for which your education, training and experience qualifies you. The earnings test states that if you are still able to work, but are unable to earn a certain percentage, perhaps 80%, of your pre-disability monthly earnings because of your condition, you may also be considered disabled.
Can you explain how the 6/6/24 pre-existing condition in the Long Term Disability contract works?
A 6/6/24 pre-existing condition provision is a limitation, not an exclusion. The limitation applies only to the first 24 months an employee is enrolled in the plan. After 24 months enrolled in the plan, Assurant does not consider any condition, even if it existed prior to the Assurant enrollment, to be considered pre-existing any longer.
A pre-existing condition is a condition for which an employee received medical treatment for, including taking medications or having consultations, in the 6 month period prior to the plans effective date. If a claim were filed for a condition within 24 months of coming onto the plan and the condition received treatment in the 6 months prior to coming onto the plan, that claim would most likely not be payable. (Any non-related condition that did not exist prior to coming on the plan would be covered immediately upon the effective date of the plan.)
Assurant's plans allow for increase in benefits at each annual enrollment if the employee did not take their maximum amount. Any increases in coverage down the road would have a similar pre-existing provision applied to the increase amount of benefit only.
For example, if a $1,000 benefit were elected initially, then 3 years later the employee elected to increase to $1,500 total benefits, the additional $500 in benefit would have a new pre-existing condition limitation. (If a claim were filed at this point, the initial $1,000 would be paid, while the additional $500 maybe not be if a pre-existing condition had existed 6 months prior to the increase of the benefit to $1,500).
