How Much Does Disability Pay?
There are a number of factors that influence how much your long-term disability ends up paying out. And it may pay out more at the beginning than it would down the road. All of this depends on the terms of your disability benefits policy or the policy that was purchased on your behalf by your employer.
In this article, we’ll discuss the factors that determine how much you will receive on a monthly basis from your long-term disability policy. If you have questions about your long-term disability claim, contact CJ Henry Law Firm today.
What Is the Base LTD Payment?
While every plan is different, most plans fall within a threshold of paying 50% to 80% of your pre-disability earnings. There is, however, a maximum that each plan will pay. You can consult your policy for more information.
Beyond that, there are two factors that must be accounted for. Those are pre-disability earnings and cost of living adjustment (COLA).
- Pre-disability earnings. Pre-disability earnings generally consist of your monthly wages prior to your disability. However, your plan may or may not factor in bonuses, overtime, or commissions.
- COLA. Your police may or may not contain a cost of living adjustment. If it does, it is generally indexed to the Consumer Price Index or some other legitimate measure of inflation.
LTD Payments Can Be Offset by Other Income
Your plan will likely contain a clause that your long-term disability benefits are contingent on what your other sources of income are. In addition, most LTD plans contain a clause that forces you to apply for Social Security Disability (SSD). If you are awarded SSD, the cost will be offset by however much SSD pays out monthly. In other words, you will be on a fixed income regardless of what other sources of income you have.
As an example, if you receive $2000 from your LTD policy and SSD awards you $800 a month, you will get $800 from SSD and $1200 from your LTD policy.
What happens if your SSD awards you more than your LTD policy pays out? More likely than not, the LTD policy will stop paying out at all. And all of your income will come to you in the form of an SSD check. Some LTD policies, however, have monthly minimums that pay out regardless of how much SSD you get. You will need to see your policy for details.
LTD Payments and Earned Income From Other Sources
Different policies will treat earned income differently. Some policies will reduce or cancel your benefits. Others may allow you to earn money so long as it doesn’t pass a specific threshold. Others will allow you to earn money for the first couple of years and stop paying out unless you’re incapable of performing any labor that earns you more than a specific percentage of your former earnings.
There are two types of LTD plans that pay out on the condition that you can no longer do the job you are currently doing and those that pay out on the condition that you can no longer to any job.
If you have an own occupation policy, you may be able to earn as much as income as you please while those terms are in place.
Almost all “own occupation” policies default to “any occupation” policies after a few years. If you’re earning income on an any occupation policy, there will repercussions for doing so. You can discuss this with your long-term disability attorney.
Tax Obligations With an LTD Policy
If the money paid into the plan was done so by your employer, then it’s almost a sure bet that they wrote it off on their taxes. Since the money was not taxed on its way into the plan, it will be taxed on its way out.
The same is not true of individual plans. These plans were paid for with income that was already taxed. Therefore, they will not be taxable on their way out.
LTD Policies Have Various Terms for Payments
Depending on the policy that your employer paid into, the length of time that the policy will pay out will vary. They might pay out for a fixed number of years or they might pay out until your reach the age of 65. You will have to look at the terms of your LTD plan to determine the length of time your policy pays.
Contact a Long-Term Disability Attorney
CJ Henry Law Firm has built our reputation on disability advocacy. If you need to file a long-term disability claim, we can help you get the evidence you need to ensure the insurance company cannot deny it. Give us a call or contact us online for more information.