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What Your Insurance Company Doesn't Tell You About Disability Insurance

Posted Friday, October 25th by Gil Laden

Some people who file for Social Security disability insurance benefits (DIB, sometimes called SSD, which is short for Social Security Disability) are eligible for long term disability (LTD) benefits through a group policy provided by their previous employer. It can provide income while the DIB claim is pending.

I read a comment to an online article recently where the individual complained about receiving LTD, but when the DIB or SSD claim was approved and he received a lump sum payment, he was required to pay the LTD carrier that money. He thought that was unfair.

What he did not realize was that he had purchased a disability policy that had an offset provision. Let me explain. That policy provided that if he was approved for and received LTD benefits, he had to apply for DIB, and, if he was approved and received DIB benefits, he had to reimburse the insurance company. Not only that, his future LTD benefits would be reduced due to the receipt of DIB.

Premiums for this type of policy are far less than premiums for a disability policy that does not have an offset provision. Likely, insurance companies would sell far fewer policies if the premium were too high to appeal to groups of employees who do not think they will ever be disabled.

Think about it. Most people do not think about becoming disabled, so they are not likely to want to pay high premiums for such a policy. If they have the misfortune to become one of the 38 million Americans with a severe disability, then they worry about how they are going to pay the bills.

There is something else to realize about these disability policies. Since they require LTD beneficiaries to file for disability benefits, that obligation does not end if those people are turned down, which happens in roughly two-thirds of cases.

They are required to appeal. The insurance company may “suggest” that people hire another firm they work with to represent them. The insurance company may even say that this representation is free. That sounds like a good deal, doesn’t it?

Let’s talk about what the insurance company is not telling you. That firm is out-of-town and will never meet with you face-to-face. If you have to go to a hearing, they will send someone who will meet with you for the first time on one of the most important days of your life. Worst yet, that person will likely not be an attorney, or from the area – and, therefore, unfamiliar with the judge or his staff.

What if you lose? The reality is that no one wins all the cases. Cases may have to be appealed to the Appeals Council, and, possibly, to federal court. The firm that works with the insurance company will not do this. It will abandon you.

Still not convinced? Under the rules of the state bar that an attorney has to follow, the attorney has to follow strict ethical guidelines and be loyal to you. The insurance company’s hand-picked representative has a contract with that insurance company. It is not bound by any state bar rules.

What about the cost of hiring a lawyer, though? Attorney’s fees have to be approved by Social Security and can result in 25 percent of the back pay (with a $6,000 limit in most instances) going to the attorney. The insurance company says their guy is free.

Remember you have to pay the insurance company back if you receive Social Security disability benefits. If 25 percent of your back pay goes to your attorney, then the insurance company should give you a credit for those fees. Either you pay the 25 percent to the insurance company or to your own attorney that you selected.

It is about making an informed decision. You deserve to know all the facts, not just the ones the insurance company wants you to know. You may want to pay small premiums, as that may be all you can afford, but the insurance carrier will have the right to reduce what it pays you due to the Social Security disability benefits. You have the right to choose who will represent you on your Social Security disability claim. You can go with a non-attorney representative from out-of-town, or you can select a local, board-certified disability attorney who will meet with you from the beginning.

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The information on this web site is made available by Gilbert B. Laden, P.C., for informational purposes only and should not be considered legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

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He has been certified as a specialist in Social Security Disability Law by the National Board of Social Security Disability Advocacy, as acknowledged by the Alabama State Bar.