Why do Long Term Disability carriers require you to apply for SSDI?
If you become disabled and need your LTD benefits, your insurer will usually ask you to apply for Social Security Disability Insurance benefits.
Author Attorney Lloyd Bemis:
Roughly one-third of workers are covered by Long Term Disability (LTD) Insurance, up from about a quarter in 1999. LTD Insurance is becoming an increasingly popular benefit. Experts suggest the recent recession had led people with low savings to pursue financial security in insurance.
Additionally, many industries that did not offer LTD benefits in the past are offering it as a relatively low-cost way to attract talent.
White-collar jobs that require extensive education are increasingly using LTD insurance to lure and retain employees. LTD insurance is most likely to be offered to professionals in the areas of medicine, law, engineering, finance and technology.
If you are fortunate enough to have access to Long Term Disability Insurance, it is highly recommended that you take advantage of it.
A 35 year old worker has a 50% chance of becoming disabled for 90 days or longer before reaching retirement age. Accidents, injuries, and illness can make it impossible for even the most motivated people to earn a living. It is best to be prepared in the case of an emergency, and Long Term Disability insurance generally offers better coverage and a higher benefit amount than Social Security Disability Insurance (SSDI) benefits.
If you have been denied disability you may still qualify for benefits. Contact an experienced Social Security disability attorney at 512-454-4000
If you do become disabled and need your LTD benefits, your insurer will usually ask you to apply for Social Security Disability Insurance benefits as well.
LTD insurers can financially benefit from your Social Security disability claim. This is because most LTD policies contain language giving the LTD carrier the right to reduce monthly LTD insurance benefits by the amount you receive in Social Security disability payments. This is called an offset. Not only will the LTD carrier seek to reduce/offset their future monthly payments by the amount of the Social Security disability benefit, the LTD carrier will claim they are entitled to any back benefits paid by Social Security for any prior period of time you were being paid LTD insurance benefits.
For example, let’s assume that you have an LTD insurance policy that pays you 60% of your annual earnings of $40,000 per year.
You would receive $24,000 per year or $2,000 per month in LTD benefits. We will next assume that you apply for SSDI benefits and receive an average benefit of $1,100 per month. While you would still receive $2,000.00 a month in total disability benefits, $1,100.00 would be paid by Social Security and your LTD policy would now only pay you $900 per month. Let’s further assume that you became disabled a year ago and received $24,000.00 in LTD benefits during this period of time. If Social Security pays you $12,000.00 in back benefits, the LTD carrier will seek to collect this $12,000.00 of back benefits from you.
This raises the obvious question as to why should you even bother to seek Social Security disability benefits.
There are several compelling reasons why you should seek SS disability benefits in this scenario:
- If you fail to file an application for SSDI benefits, most LTD policies give the insurance carrier the right to estimate what you would have received if you had applied for benefits and then deduct this estimated amount from your monthly LTD benefits whether or not you applied for disability with the SSA.
- LTD carriers regularly deny LTD claims even after they have paid for years and even if there has been no change in your condition. If this occurs and you have obtained an SSDI award, you will still receive your monthly SS disability benefits thus giving you a safety net.
- A favorable disability finding from Social Security will provide you with additional evidence of disability if the LTD carrier denies your LTD claim in the future.
- You will also be eligible for Medicare two years after you are first entitled to SSDI benefits. This means that you can use COBRA to continue your health insurance without a gap up until your Medicare becomes effective.
- Eligibility for SSDI does not continue indefinitely. As you work, your SSDI work credits increase. However, even if you have the maximum work credits, they will generally expire after approximately 5 years of not working. This means that if you cannot prove you were disabled within this 5 year window you will no longer be eligible for Social Security benefits. Therefore, if you are outside this window and your LTD carrier becomes insolvent or denies your claim, you will no longer have the safety net that SSDI provides.
Because LTD carriers financially benefit from the SSDI offset, they usually encourage their insureds to file for SS disability.
They even recommend law firms with whom they have reached a financial arrangement to handle these SSDI claims on their insured behalf. One of the incentives they offer is that because of their arrangement with these firms, you will not have to pay any fees on your Social Security claim. This is not as good as it sounds.
You should first understand that Social Security regulates fees that attorneys can charge for handling SSDI claims and the fees cannot be more than 25% of back benefits with no fee on future benefits.
What most people don’t know is that the offset afforded under most LTD policies is for the net amount the client receives after fees. In our example above, if Social Security awards $12,000 in back benefits and there are no fees on the Social Security award, the LTD carrier will seek to collect the full $12,000 in back benefits and will pay the attorney some reduced fee out of their full recovery. However, if the insured obtains independent representation based on the allowed 25% of back benefits, then the insured will now collect $8,000 and under most LTD policies will be obligated to pay back only this amount. In both scenarios the cost to you remains the same. However, there can be substantial benefit in obtaining your own attorney to pursue your SSDI claim.
Contact a Social Security disability attorney at 512-454-4000 for a free consultation and see if you can get disability benefits. If you have been denied disability don’t give up!
With independent counsel you will be able to select an attorney that acts solely in your best interest instead of one who has a financial relationship with the LTD carrier.
As the attorney will be receiving a full contingency fee, he or she will work diligently on your behalf. As indicated above, wining your SSDI claim is good evidence of the legitimacy of your LTD claim. If the LTD carrier is in the process of denying your claim a favorable SSDI claim may not be in the LTD carrier’s best interest. In addition, you may have an option to keep your SS insurance back benefits and force the LTD carrier to get paid its offset out of future benefits. This is particularly helpful to avoid the unconscionable, but common practice where LTD carriers convince you to pay the LTD carrier all of your SSD back benefits and then within a month or two of receiving your back benefits sending you a letter denying your future LTD benefits on the grounds that you are no longer disabled.
The interrelationship between long term disability insurance and Social Security disability insurance is complex and this complexity often allows for insurance company mischief. If you have applied for either LTD or Social Security disability and have concerns about the effects of pursuing these claims, the social security disability lawyers at Bemis, Roach and Reed can help. Our attorneys have experience helping people win their disability claims. Contact us today for a free consultation. Call 512-454-4000 and get help NOW.
Author: Attorney Lloyd Bemis has been practicing law for over 35 years. He is Superlawyers rated by Thomson Reuters and is Top AV Preeminent® and Client Champion Gold rated by Martindale Hubbell. Through his extensive litigation Mr. Bemis obtained dual board certifications from the Texas Board of Legal Specialization. Lloyd is admitted to practice in the United States District Court – all Texas Districts and has argued before the U.S. Court of Appeals, Fifth Circuit. Mr. Bemis is a member of the Travis County Bar Association. He has been active in the American Association for Justice and is a past Director of the Capital Area Trial Lawyers Association. Mr. Bemis and all the members of Bemis, Roach & Reed have been active participants in the Travis County Lawyer referral service.
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