Are you disabled and considering working while on long-term disability? There’s important information you need to know to make the best decision for you. If your income could be as much as you pre-disability income, or close to it, your long-term disability benefits may be at risk.
The key to whether you continue to receive your full long-term disability (LTD) benefits, if you return to work, depends on the specific terms in your policy. Generally, if you have an “own occupation” (own occ) policy, you will have a wider variety of options for returning work than if you have an “any occupation” (any occ) policy. Here’s an overview of the policy differences.
Own occupation policies determine your qualification for disability benefits in terms of your ability, or inability, to carry out activities related to your chosen occupation. For example, let’s take a civil engineer who is no longer able to perform the strenuous activities associated with his or her chosen profession. They would be considered disabled under an “own occ” policy-even if they could work in a less strenuous occupation.
If you work in a profession different from what is considered your chosen profession, your LTD benefits may not be affected. However, there are exceptions to the rules.
Insurers have started to include a caveat in own occ policies. The caveat relates to the amount of income which may be earned. If the civil engineer in the example above began working as an insurance broker and earned 80% or more of her pre-disability salary, she would no longer be eligible for long-term disability benefits.
Another clause that is being added to own occ policies is called the “Return to Work Incentives.” Under this clause, an individual who is considered disabled cannot have earnings from benefits and working that total more than 100% of their pre-disability salary. In this situation, your insurer would decrease your LTD benefit to reduce your total income to equal your pre-disability salary. This dollar-for-dollar reduction of benefits may only apply for the first twelve months of disability. After the first year, the benefit reduction would continue at a different rate.
If your own occupation requires a professional or occupational license, there is another condition that might apply to you. For example, let’s say you are disabled while performing your own occupation as an engineer. The definition of “own occupation” would be broadened to include any job that requires the same license you hold.
Remember our civil engineer turned insurance broker? According to this provision, if she was declared disabled while working as a civil engineer, an insurance company could deny her disability benefits if she was able to work in a different position which requires the same engineering license she has.
Currently, the professional services license condition has only appeared in a small percentage of policies. Basically, if you have an own occ policy, you can work in another profession without substantially affecting your LTD benefits.
Under an “any occ” long-term disability policy, in order to receive benefits, an individual must be considered unable to perform any occupation they are reasonably qualified for based on education and experience. Coincidentally, there are circumstances when an “own occ” policy converts to an “any occ” policy after 24 months. Check your policy terms carefully.
The terms of an any occ policy may vary. But basically, the more income you earn, the more your disability benefit will be reduced. Your disability benefit would typically not change if you earn less than 20% of your pre-disability salary. Conversely, if you earn over 80% of your pre-disability salary, your disability benefits may be completely terminated.
An easy way to remember the terms of an any occ policy is as follows. If you earn between 20 and 80 percent of your pre-disability income, your benefits will be reduced accordingly. If you earn more than 80 percent of your pre-disability income, your LTD benefits will terminate.
Under both the own acc and any acc policies, the insurance company will want to see proof of income information to confirm your salary.
Some any occ policies include a rehabilitation incentive to encourage individuals to return to work. Benefit recipients can take advantage of approved job training programs. They will receive a 5 to 10 percent increase in their monthly benefits.
Collecting LTD benefits? Before going back to work, call CJ Henry Law Firm. We can help you determine whether working while on long-term disability is allowed under your disability policy terms.