Alphabet soup: forms of disability coverage

The most common question I’m asked by patients planning for the future is simply: “What is disability coverage?” Generally, there are four types that affect most individuals — two private and two government-based.

Long-Term Disability (LTD)

LTD is private insurance purchased by an individual or their employer. It is contract-based: the policy specifies what coverage exists, the requirements to obtain benefits, and the amount. Still, most plans share some traits. Benefits typically begin a certain number of weeks after the claimant last worked and — as the name suggests — can continue for a long period, possibly until age 65 under many plans. Payments replace a portion, but not all, of pre-disability income.

To obtain LTD benefits, claimants must initially show they can no longer perform the duties of their last position. This “own-occupation” standard applies for the first 24 months. After 24 months, the standard changes: the claimant must show they cannot do any job that (1) fits their education, (2) fits their disability, and (3) pays a specified percentage of their pre-disability earnings.

A history professor earning $100,000 must initially show they cannot work as a history professor. After 24 months, they must show they cannot find any work paying a portion of that salary (say, 60%) given their education and limitations — so even if they could work as a department-store greeter, the greeter salary likely wouldn’t disqualify them.

A person collecting LTD must keep the insurer advised of treatment and work status, and the insurer will periodically review the claim. Claimants are often denied after an initial application or a periodic review. In that event, it is strongly recommended you seek counsel promptly. In theory, an LTD claimant with a long-term degenerative condition could collect until age 65.

Short-Term Disability (STD)

STD is a close relative of LTD, typically paid for by individuals or employers. It is generally intended to cover the initial period after a person becomes disabled and before the LTD waiting period expires — you do not collect LTD and STD at the same time. While LTD often covers long-term illnesses, STD may simply act as a bridge during recuperation. A person may have LTD without STD, and vice versa. Like LTD’s own-occupation period, STD typically requires showing you cannot perform your pre-disability position.

Social Security Disability Insurance (SSDI)

SSDI is a federal program funded through Social Security taxes. Individuals who have worked a substantial portion of their adult lives — and are now disabled from employment — qualify. You can collect SSDI at the same time as LTD or STD; in fact, many LTD plans require you to apply for SSDI.

Supplemental Security Income (SSI)

SSI is a sister program to SSDI — both provide government assistance for individuals unable to remain in the workforce. Many people apply for SSDI and SSI at the same time. Unlike SSDI, SSI does not require a work history, but it does limit a claimant’s assets to a total of several thousand dollars, and its monthly benefits are notably lower. SSI recipients have access to Medicaid instead of Medicare. LTD plans usually require claimants to apply for SSI alongside SSDI, and the same offsets apply.

Summary

The above is intended to provide a basic, general understanding of the primary forms of disability coverage and how they interact. It is meant to supplement — not replace — the advice of an attorney familiar with your specific plans and circumstances. Mr. Hall can be reached at (610) 570-5253 or jhall@jrhlegal.com.