The short answer is yes.
One of the most common sources of confusion for long term disability (“LTD”) claimants is the relationship between long term disability insurance and Social Security Disability Insurance (“SSDI”). These are two separate programs that have different eligibility criteria, application processes, and benefit amounts. You may not understand why your disability insurance company requires you to file for SSDI on top of your LTD.
In this article, we will explain the basics of long term disability (“LTD”) insurance and Social Security Disability Insurance (“SSDI”), why your LTD insurer requires you to file for SSDI, and how this impacts your LTD claim.
What Is the Relationship Between Long Term Disability Insurance and Social Security Disability Insurance?
Long term disability (“LTD”) insurance and Social Security Disability Insurance (“SSDI”) are two distinct types of disability benefits designed to provide financial assistance, but they serve different roles and are managed through separate systems.
Long Term Disability Insurance: This is a private insurance policy that you might have through your employer as part of a benefits package or that you’ve purchased individually. Long term disability provides you with a portion of your income if you become disabled and are unable to work for an extended period. The specific terms, such as the amount of the benefit and the length of the waiting period before benefits begin, are determined by your policy.
Social Security Disability Insurance: SSDI is a federal program managed by the Social Security Administration. It provides benefits to you and certain family members if you are “insured,” meaning you have worked long enough and paid Social Security taxes. SSDI benefits are only available to individuals who have a long-term disability expected to last at least one year or result in death, and the process for qualifying can be rigorous and lengthy.
The primary relationship between LTD and SSDI lies in the offset clause found in many LTD policies. This clause requires that the amount you receive from SSDI be deducted from the benefit paid by your LTD insurer. This means if you qualify for both, your LTD insurer will reduce its payments by an amount equal to what you receive from SSDI, thus lowering their financial obligation. Additionally, nearly all employer-provided LTD policies require applicants to apply for SSDI to potentially offset the costs to the insurer.
Why Would My LTD Insurer Want Me to Apply for SSDI?
Your long term disability (“LTD”) insurer will typically require you to apply for Social Security Disability Insurance (“SSDI”) for two major financial and practical reasons:
Financial Offset: The most important reason most LTD policies require you to apply for Social Security is that it reduces the amount they have to pay you. Most LTD policies include a provision that allows the insurer to reduce the benefits they pay you by the amount you receive from SSDI. This means that if you are approved for SSDI, the insurer’s financial obligation decreases, which is financially advantageous for them.
Review of Disability: Another reason LTD insurance companies require you to apply for SSDI is that you will be subject to another entity reviewing your medical records and other evidence supporting disability. This can ensure accuracy of claim determinations, reducing claim review costs for the insurer.
By requiring you to apply for SSDI, your LTD insurer manages their financial risk.
Can My Insurer Legally Require Me to Apply for SSDI?
Yes, your long term disability (“LTD”) insurer can legally require you to apply for Social Security Disability Insurance (“SSDI”) if such a requirement is explicitly included in your insurance policy.
When you sign up for an LTD policy, you agree to the terms and conditions set forth in the policy document. If the policy includes a clause that requires you to apply for SSDI, you are contractually obligated to comply as part of your agreement with the insurer. Many LTD policies include offset provisions that allow the insurer to reduce the amount of benefits they pay you by the amount you would receive from SSDI. By requiring you to apply for SSDI, the insurer ensures they can apply these offsets as stipulated. Insurers also include these requirements as a way to manage risk and reduce their financial liability. If your SSDI claim is approved, that will reduce your insurance company’s their payout.
Should you fail to apply for SSDI despite this requirement, the insurer might have the right to estimate your potential SSDI benefits and reduce your LTD payments by that estimated amount, or they might even deny or suspend your benefits under certain circumstances.
If your LTD policy contains such a requirement, it is generally enforceable under the terms of the contract. Therefore, understanding the specific provisions of your LTD policy is crucial to managing your rights and responsibilities effectively. If you are unsure about these provisions or their implications, consulting with a disability attorney might be beneficial to get clear guidance based on your situation.
What Happens If I Am Reluctant to Apply for SSDI?
If you are reluctant to apply for Social Security Disability Insurance (“SSDI”) but your long term disability (“LTD”) policy requires it, several consequences can arise:
Reduction of Benefits: If your LTD policy includes a provision that allows the insurer to offset your benefits by the amount you would receive from SSDI, the insurer might reduce your LTD payments by an estimated SSDI amount, even if you have not applied or been awarded benefits. This estimated deduction can significantly lower the monthly benefit you receive from your LTD insurance.
Suspension or Termination of Benefits: Some LTD policies stipulate that failure to comply with all policy requirements, including applying for SSDI, can lead to suspension or termination of your benefits. This means you could lose your LTD benefits entirely if you choose not to apply for SSDI.
Breach of Policy Terms: By not applying for SSDI, you may be considered in breach of the terms of your LTD policy. This breach can be used by the insurer as a basis to deny any future claims or to discontinue current benefits.
Legal or Financial Complications: If you later decide to apply for SSDI, the delay in application could complicate your financial situation. SSDI processing times can be long, and delays in applying could mean a longer period without any SSDI benefits, during which time your LTD benefits might already be reduced or suspended.
To manage these potential outcomes, it’s important to:
Review Your Policy: Understand the specific requirements and provisions regarding SSDI in your LTD policy.
Consult with a Long Term Disability Attorney: Consider speaking with a disability attorney who can provide legal advice tailored to your situation and help you understand the potential implications of not applying for SSDI.
Weigh the Benefits and Risks: Consider the long-term benefits and risks associated with applying for SSDI, including the potential for additional financial support versus the effort and uncertainty of the application process.
How Does Applying for SSDI Benefit Me?
While your insurance company has financial incentives for your SSDI claim, applying for Social Security Disability Insurance (“SSDI”) in addition to receiving long term disability (“LTD”) insurance benefits can also provide several advantages to you as the claimant:
Additional Financial Security: SSDI benefits can offer a critical financial buffer.
Even if being approved by the Social Security Administration does not increase the amount of income you receive every month, having another source can provide stability. This can be important if your LTD insurer ends or delays benefits in the future.
For some, LTD benefits do not cover their entire pre-disability income. This may result in only a partial offset for SSDI benefits
SSDI benefits continue as long as you remain disabled according to Social Security’s criteria, potentially providing financial support even after LTD benefits expire.
Cost-of-Living Adjustments (“COLA”): SSDI includes annual cost-of-living adjustments, which can increase your benefit amount over time to keep pace with inflation. Many LTD policies do not offer similar adjustments, so SSDI can help maintain your purchasing power.
Health Insurance Benefits: After receiving SSDI benefits for 24 months, you are eligible for Medicare, regardless of your age. This can be particularly beneficial if your LTD benefits do not include health insurance or if you lose your employer-sponsored health coverage due to your disability.
Long-Term Security: SSDI provides long-term financial security as the benefits continue until you reach retirement age, at which point they convert to Social Security retirement benefits. This seamless transition can provide peace of mind about future income.
Protection for Your Family: SSDI may also provide benefits to your dependents, including minor children or a spouse caring for minor children. This is not typically a feature of LTD policies, which generally only provide benefits to the insured individual.
Continued Eligibility for LTD: With SSDI approval, your LTD insurer is more likely to continue your benefits without dispute, especially during any reviews of your LTD claim’s ongoing validity. The SSA’s confirmation of your disability status under their strict criteria can make it difficult for an LTD insurer to justify a decision to terminate benefits on the grounds of non-disability.
While applying for SSDI involves navigating a complex process with stringent eligibility requirements, the potential additional benefits make it a worthwhile consideration for many individuals receiving LTD benefits.
Should I Use My Own Attorney When Applying for SSDI?
Yes, it is advisable to use your own attorney when applying for Social Security Disability Insurance (“SSDI”). There are many compelling reasons to choose an independent attorney rather than relying on a third-party company provided by your insurer, such as:
The Fee Will Probably Be Paid by the LTD Insurer: If you are approved for both LTD and SSDI, your insurer will typically pay for the attorneys' fees of the Social Security Disability attorney, even if you choose your own. These fees will be included in the overpayment calculation, which is described in the next section.
Personalized Representation: An independent attorney can provide personalized service and attention to your specific case. They can tailor their approach based on your unique medical condition, work history, and personal circumstances, which can enhance the strength of your application.
Loyalty and Advocacy: An independent attorney is solely dedicated to your interests, unlike a third-party company that might be contracted by your insurer. This means your attorney is more likely to advocate vigorously on your behalf without any potential conflicts of interest.
Expertise in Disability Law: Independent attorneys specializing in SSDI are deeply knowledgeable about disability law and the Social Security Administration’s (“SSA”) processes. They can navigate complex situations, address intricate legal issues, and provide expert advice on how to best manage your claim.
Handling Appeals: If your initial SSDI claim is denied, an experienced SSDI attorney can handle the appeals process effectively. They know how to gather additional evidence, prepare for and represent you during hearings, and argue your case before a judge.
No Conflicts of Interest: Using an independent attorney ensures that there are no conflicts of interest, which might not be the case with a third-party company tied to your insurer. Your attorney’s primary goal is to secure the best possible outcome for you, not to minimize costs for an insurance company.
Contingency Fee Basis: Most Social Security Disability attorneys work on a contingency fee basis, meaning they only get paid if you win your case. This aligns their interests with yours, as they are motivated to help you receive SSDI benefits.
Choosing to work with an independent disability attorney can provide significant advantages in managing your SSDI application effectively and maximizing your chances of approval. If you need help finding a Social Security Disability attorney, give us a call. We can recommend our trusted colleagues to help you.
What Happens to My LTD Claim if My SSDI Claim is Approved?
If your Social Security Disability Insurance (“SSDI”) claim is approved, the approval impacts your long term disability (“LTD”) claim through what is known as an “offset.” Many LTD policies have a provision that allows the insurer to reduce your LTD benefits by the amount you receive from SSDI. For instance, if you receive $2,000 monthly from SSDI and your LTD benefit is $3,000 monthly, your insurer will reduce the LTD payment by $2,000, resulting in a new LTD payment of $1,000. This adjustment ensures that your total monthly disability income remains consistent with your pre-disability salary.
Additionally, processing times for SSDI claims can lead to retroactive payments covering the period from your eligibility date up to the start of regular payments. If this retroactive benefit overlaps with the period you were receiving LTD benefits, you will need to repay the insurer for this overlap. This is called an “overpayment.” For example, if you receive a retroactive SSDI payment of $24,000 for the past 12 months and you were also receiving $2,000 per month from LTD during these months, the insurer will require you to repay the $24,000 overpayment since they were making payments without accounting for SSDI.
Your LTD insurer will calculate the exact amount of the offset based on the SSDI benefits you receive. These calculations are outlined in your policy documents and are usually communicated through statements from your insurer. Following the approval of your SSDI claim, your insurer will adjust your monthly payments accordingly and inform you of these changes in advance.
It’s crucial to comply with the terms of your LTD policy, which likely includes notifying the insurer of any SSDI payments, including retroactive ones. Failure to do so can result in overpayments that you might need to repay and can complicate your contractual relationship with the insurer. Having an experienced long term disability lawyer review your insurer’s calculations of the offset can ensure that you are receiving the correct monthly benefit.
How Can The Maddox Firm Prove My Short or Long Term Disability Claim?
At The Maddox Firm, we understand the complexities involved in proving short or long term disability claims. Our experienced team is dedicated to navigating the intricacies of disability insurance to ensure you receive the benefits you deserve.
Here are a few ways we can prove your short or long term disability claim:
We Examine Your Policy and Assess Your Claim: We begin by thoroughly reviewing the specific terms and conditions of your disability insurance policy. This enables us to assess your claim accurately and develop a strategic approach tailored to your situation.
We Handle All Communications with Your Insurance Company: Our team manages all interactions with your insurance company, ensuring that your rights are protected throughout the process. This includes handling communications regarding the status of your SSDI application and any necessary calculations related to overpayments, ensuring that all financial aspects are correctly addressed and accounted for.
We Help You Obtain Evidence to Support Your Claim: Securing robust evidence is crucial for substantiating your disability claim. We assist in gathering all necessary medical documentation and expert opinions. Additionally, we use SSDI approvals as compelling evidence of your disability, reinforcing the validity of your claim with the insurer.
We Handle Appeals and Litigation: If your claim is initially denied, we are prepared to handle the appeals process, leveraging our legal expertise to overturn unfavorable decisions. Should litigation be necessary, we are committed to advocating vigorously on your behalf in court to secure your benefits.
By providing comprehensive legal support, The Maddox Firm ensures that every aspect of your short and/or long term disability claim is handled professionally and effectively, maximizing your chances of a favorable outcome.
If you need help during the claims process, with appealing a claim denial, or with litigating a final adverse short term or long term disability decision, The Maddox Firm can help. The experienced team at The Maddox Firm will examine your insurance policy, correspondence from your insurance company, medical records, and any other relevant documentation in order to give you personalized guidance on how we can help you win your short and/or long term disability claim. Our New Jersey and New York long term disability attorneys help clients nationwide.