Recovering from an injury that is covered by long-term disability (LTD) insurance, like a heart attack, cancer, stroke, fracture, muscle strain, mental health problem, or circulatory condition, can be economically and psychologically draining. You want to know if you can test your capacity to work without jeopardizing your benefits, and what will happen if you return to work but are unable to sustain it.
Can you work while maintaining your LTD benefits? The answer to this question is complex and depends on the specific facts of the case. If you will be earning the same amount you were earning before the injuries, the LTD benefits may be at risk. Even when the new earnings are less than what you previously earned, your disability benefits will be in jeopardy if the income represents a substantial percentage of your pre-disability earnings.
Definition of Long-term Disability (LTD) Insurance
LTD insurance is a policy or coverage that offers financial protection when you cannot work for an extended period because of a disabling injury or disease. LTD insurance typically replaces a portion, often between 50% and 80%, of a claimant’s pre-disability income, depending on the policy. You can obtain the policy through your employer's group plan, a professional entity, or a union. Alternatively, you can buy your policy directly from an insurer in the open market. Understanding the group or individual policy is complicated due to the numerous exceptions and strict timelines. Unlike workers’ compensation insurance, which provides coverage for injuries sustained on the job or while performing tasks for the benefit of the employer, LTD coverage extends to various disabling conditions or injuries, even if the injury or illness did not occur while performing job-related tasks.
The purpose of LTD coverage is to provide you with money to cover your expenses for the period you are unable to work because of an injury or illness. The employment terms under LTD are nuanced and vary depending on the type of insurance policy and the insurer chosen.
Work Rules of LTD Policy
The rules of LTD coverage depend on the type of policy. Many policies encourage you to resume work if you can find a job that suits your body and health. Work resumption is guided by policy provisions; otherwise, you risk forfeiting your LTD benefits. If you are receiving these benefits, your policy issuer will offer you multiple programs to help you test your work abilities and restore financial independence.
The key is to understand the legal definition of disability as outlined in your policy and the insurance coverage contract terms, as well as their impact on your income during the period you are still receiving LTD benefits. The contract terms will define how you will return to work and the amount you should earn for the job while maintaining the disability benefits.
Types of LTD Policies and Their Impact on Your Ability to Work While Receiving Benefits
Your choice of an LTD policy determines if you can work while you receive benefits. There are two general forms of LTD insurance. These are:
Own Occupation Policy
Also referred to as an “own-occupation” policy, own occupation means you are deemed disabled if you cannot undertake a material or substantial task for income or profit in your specific occupation. Disability under the policy means your injuries or illness prevent you from undertaking the primary roles of your job.
For example, if you are a firefighter insured under your own occupation policy and you sustain a fracture that prevents you from carrying firehoses or climbing ladders, you qualify for LTD benefits, despite having the ability to perform another task that does not involve straining. You are eligible because the primary functions of firefighters include climbing ladders and carrying fire hoses. If you are unable to perform these tasks, you qualify as disabled under the policy. In fact, because you possess the capacity to work in a different job, you can find an easier position that suits your health and ability and still maintain LTD benefits. However, the insurer can reduce them because you are earning a salary.
Can you work under your own occupation policy? The answer is yes. You can work full-time or part-time in a different profession and still receive insurance benefits. Nevertheless, you must review your policy with the help of an experienced disability law attorney to understand the existing rules and exceptions.
Any Occupation “Any Occ” Policy
Any occupation coverage defines disability as the inability to undertake tasks in any job that you reasonably qualify for, contingent on your education, training, and experience. This policy has a narrow definition of disability. You must demonstrate a total inability to work in any job you are reasonably qualified for.
For instance, you are a surgeon who suffers a stroke that leaves you paralyzed on one side. You depend on others for even the most basic routines, such as bathing. Under the circumstances, you cannot work in any job, meaning you would generally qualify for any-occupation disability benefits. However, if the stroke only affects your hands, but the legs and brain are fully functional, it means you can work at a medical college as a lecturer. Therefore, you cannot receive any occupation insurance benefits because, under the policy, you are not disabled. Under an own-occupation policy, the claimant could continue working in the medical college and still receive disability benefits. If you work while receiving any occupation benefits, the insurer will terminate your benefits.
LTD policies transition between own-occupation policies and any-occupation policies. Many LTD policies apply an own-occupation definition for an initial period, often 24 months. If the period expires or the insurer determines you have had significant medical improvement to perform the material roles in your occupation, the policy reverts to any occupation coverage. The time when your policy transitions determine the definition of disability and whether you can work while receiving benefits.
Understanding Policy Terms Under Own Occupation LTD Coverages
You can work both part-time and full-time with your own occupation policy. However, the specific terms of the contract can have restrictions that could limit the benefits amount or eligibility. These include:
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Earning Limitations
Some LTD policy issuers introduce rules in the insurance contracts that limit the disability benefits you should receive when you start working and your earnings reach a specific limit. The amount you will receive depends on the policy terms and the circumstances surrounding your disability.
Most coverages will replace approximately 50% to 80% of the pre-disability income before the disability occurs. While your own occupation policy is active, you can work in a different job while meeting the eligibility criteria for the disability benefits. Nevertheless, the moment your earnings and benefits from the new job meet or surpass 80% of your income before the disability, the insurer will terminate your benefits.
For instance, in your previous job before injuries, you used to earn $200,000 annually. However, after disability, you secured another job where your annual income is $160,000. Under the circumstances, your insurer will terminate your benefits because your earnings are 80% of the earnings before disability.
Read your LTD policy terms on wage limitations and understand how the calculations of the disability benefits are done. Your benefits may vary depending on the policy period, with some coverages allowing you to earn more in the initial stages after resuming work.
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Return To Work Incentives
Many LTD coverages provide incentives to beneficiaries who return to work. The incentives allow you to earn more than 80% of your previous wages and disability benefits before disability, but not more than 100%. It means you could be allowed to earn an equivalent of your pre-disability salary in wages plus the disability benefits. Nevertheless, when the wages and insurance benefits of your current occupation exceed 100% of the pre-disability earnings, the insurer will cut your disability benefits until the total monthly earnings equal your income before the disability.
The disability benefit cuts in many policies only take effect in the first year of the disability. Therefore, refer to the policy or contact your insurer to establish if there will be any changes to your policy terms after the first year.
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Professional Services Provision
LTD policy beneficiaries who offer professional services and are professional license holders are limited in the ability to provide their services by their insurance policy. Most of these jobs require permits to practice. Even if your LTD insurance policy permits you to work in a different field after a disability, it restricts the occupations to your license’s scope.
The scope of your license is any job a person with your professional license can perform. Own occupation insurance providers' coverage to applicants who have lost their ability to perform primary tasks in their career, but still can perform other jobs outside their occupation. Eligibility depends on the policy provisions. Therefore, if, after an injury or illness, you plan to return to work to the same position or field you previously held, your insurer will terminate your benefits once you start work.
Most own-occupation LTD coverages will allow you to continue receiving disability benefits even after you return to work, provided it is in a different field or line of work. However, they could terminate these benefits if you return to your previous occupation or job position. If you plan to resume work after an LTD, review the terms of your policy or consult with a seasoned disability law attorney to ensure that your disability benefits are not interrupted.
Working Part-Time On Any Occupation LTD Coverage
When a disability leaves you unable to undertake any job for which your experience, education, and training qualify you, you are eligible for any occupation benefits. Many LTD policies do not start as any occupation policy but transition with time after two years.
If you are working part-time, how many hours should you work to maintain your any-occupation LTD benefits? Several any-occupation plans offer partial disability benefits to some beneficiaries, enabling them to continue working while maintaining their benefits. The benefits are cut based on the proportion of your new earnings. If the wages increase, the benefits are reduced.
Per the policy, your insurance payments or benefits will remain the same if you work part-time and earn below 20% of your wages before the disability. For earnings ranging from 20% to 80% of the previous salary, the insurer will lower your benefits by your earnings. If the earnings are at least 80% of the prior earnings, the insurer will terminate your benefits altogether.
Part-time jobs pay on an hourly basis. Therefore, you must estimate the number of hours you must work to ensure that your earnings do not negatively impact your disability benefits. During this period, you must furnish your insurer with evidence of your hourly rates and the number of hours you have put in.
The purpose of all LTD policies is to offer financial benefits while you battle a health problem or injury. Even any occupation coverage plays the same role. The policies have mechanisms that enable you to start work. One of them is the rehabilitation incentive. They have a rehabilitation provision entailing a trial work duration of three to six months. Within this duration, you must try to work in a new job or on your own while maintaining your benefits. During the trial, you should notify the insurer of your work activities and the number of hours worked. You will receive partial benefits over the trial period.
However, if the disability hinders you from working during the trial, you can leave and still maintain full benefits if you do so within the trial period and adhere to the rules. During the program, the insurer offers rehabilitation incentives of an additional 5% to 10% of the monthly disability benefits to encourage beneficiaries to engage in rehabilitation provisions or occupation training programs.
Job Security While On LTD Benefits
Private LTD policies do not provide job security. Their role is to provide financial protection during the duration you are unable to work. Therefore, your employer is not obligated to accept you in your pre-disability role. However, other laws exist to protect disabled workers from being terminated because of their disability.
Find a Competent Disability Law Attorney Near Me
You can work while on LTD benefits, but you must strictly adhere to the policy terms, maintain open communication with the insurer, and keep proper records while you do so. The policy is designed to provide economic protection when you are unable to work. If you violate the policy terms, you may encounter difficulties continuing or reinstating your LTD benefits. Whether you are working or plan to start work, you must consult a Los Angeles disability law attorney to understand your options.
At Leland Law, we will help you start working while you continue to receive your benefits. Call us at 866-449-6476 for legal help in California.
