Understanding Disability Policies

What Kind Of Disability Policy Do I Have, And Why Does It Matter

The two types of disability policies are an employer-sponsored ERISA policy or a private disability policy you purchase on your own through a disability insurance agent.

There is a world of difference between these two types of policies that impact what medical conditions are covered, the amount of your benefits and whether you have a fair playing field if you have to file a lawsuit to get your benefits.

ERISA Policy

Your employer may have offered you the opportunity to purchase a disability policy. That plan is generally governed by the Employee Retirement Income Security Act (ERISA). (If you work for a municipal, state or federal employer or for a religious organization, your policy may be exempt from ERISA.)

The ERISA statute and rules are not friendly to disabled policyholders. ERISA policies often have:

1. A “get out of jail free card” policy provision that grants the disability carrier the “discretion” to decide whether to pay or deny your claim. The discretionary clause makes it difficult for a disabled policyholder to overturn a claims denial in Federal Court.
2. Limitations on the types of medical conditions covered or the length of time the insurance company will pay benefits for those conditions.
3. “Other income” provisions that allow the disability insurance company to deduct the amount of your Social Security Disability benefits and those of any dependents, workers’ compensation benefits and even the proceeds of a lawsuit for personal injury.

Private or Individual Policy

The best type of disability policy is a private or individual disability (ID) policy. Unfortunately, these policies can cost hundreds of dollars per month, and many just can’t afford such a policy.

An ID policy can be customized to meet your financial needs. Many policies:

1. Can be occupation or sub-specialty occupation specific.
2. Have limited “other income” provisions that can reduce your benefits.
3. Have cost of living or waiver of premium provisions.

What’s the Difference and Why It Matters

An ERISA policy is governed by the federal ERISA law, which provides rules for how a denial must be appealed and when the carrier must make a decision on the claim. While that sounds like it should help a disabled policyholder, the discretionary clause makes it easy for a carrier to deny a legitimate claim for benefits.

Worse, if you have to file a lawsuit to get your benefits, you must file in Federal court. There is no trial of an ERISA case, and the federal judge must decide your case solely on what was in the disability carrier’s file at the time of the denial. That makes it difficult, if not impossible, to put in new evidence about your medical condition or even award Social Security benefits.

The federal judge is not deciding if you are disabled but rather whether the disability carrier’s decision was arbitrary and capricious. That is a tough burden to prove and, even if you win, policyholders rarely are awarded attorney fees and costs at the expense of the insurance company.

On the other hand, if a private or ID claim is denied, the claims process is friendlier. If you have to sue, the lawsuit is filed in State court. You’ll have the opportunity to introduce new evidence and have a trial. Disability carriers hate having to play on the level playing field in state court.

You can be awarded punitive damages, interest and even attorney’s fees and costs at the disability carrier’s expense.

It’s Time To Call ERISA and Private Disability Insurance Attorney Nancy L. Cavey

Don’t make a crucial mistake that can destroy your claim for disability benefits before you stop working or file a claim. It’s time to call ERISA/ID disability attorney Nancy L. Cavey. She can review your policy, explain what benefits the policy will pay and formulate the right strategy so you get the disability benefits you and your family deserve.