While long term disability insurance can be an important part of financial planning, many people who purchase such insurance may not understand how it works in the face of other benefits, such as Social Security Disability or workers' compensation benefits. Indeed, many people don't plan on seeking long term disability benefits from their insurer (even though having a policy is prudent), but knowing how they work and what can be received in the midst of other benefits can reduce surprises.
This post will briefly explain the interplay between long term disability benefits and other injury compensation methods.
In a nutshell, long term disability (LTD) insurance is designed to cover income lost because of the inability to work due to an illness or injury that renders a person unable to perform the material and important duties of their occupation in the usual manner. Typical LTD policies pay between 50 and 80 percent of one’s pre-disability earnings and they are commonly offered by private insurers, such as MetLife, Aetna or Cigna. Generally, disability coverage provides benefits for a maximum period of disability to age 65.
Social Security disability and workers’ compensation are publicly funded programs that are designed to help injured workers make ends meet while they are disabled. In theory, they serve the same purpose of private LTD policies. However, it is important to know that one’s LTD policy may contain clauses that allow the insurer to reduce benefits based on the amounts he or she may receive from other insurance benefit plans.
To fully understand the interplay between LTD insurance, workers’ compensation and even some no-fault PIP plans, contact an experienced attorney.