Understanding the length of time you can receive disability benefits is crucial for financial planning and managing expectations. The duration of disability benefits can receive disability benefits is dependent on several factors which are all spelled out in your policy. These are some of the major ones:
- Whether you are unable to perform the duties or your usual occupation or cannot perform the duties of any occupation
- The nature of your disability — some conditions are payable for limited periods of time
- Your age when disability began
- Whether your disability is due to an accident or illness
- Whether your disability is catastrophic and causes the loss of eyesight, speech, hearing, or the loss of limbs
- Whether you qualify for Social Security disability
This discussion is intended to only to provide a general discussion of these issues. Policies vary; and the length of time you can receive disability benefits is determined by the terms of your specific policy. In general, though, the duration of coverage lasts until you reach either age 65 or Social Security normal retirement age, although some policies contain duration limits that may be longer or shorter.
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When Does Disability Insurance Coverage End?
A related, but different topic is when disability insurance coverage ends. For individual disability insurance, coverage ends either when the insured stops paying premiums or when an insured reaches a certain age. Group coverage ends when an employee is no longer actively working, unless the cessation of work is due to disability. While some policies permit employees to extend coverage when their employment ends, such policies are increasingly rare. Likewise, if someone has been receiving benefits under group coverage and those benefits end, coverage ends as well. This is true unless the claimant returns to their prior job. Although, most policies contain provisions regarding recurrent disabilities, meaning that if the insured suffers a relapse within 6 months of benefits ending and returning to work, benefits can be reinstated. The general rule, though, is that coverage ceases at the end of the last date of employment.
Occupational Disability or General Disability
Most group and individual disability insurance policies define disability based on the insured’s inability to perform their occupational duties due to sickness or accident for up to 24 months. To receive ongoing benefits, the insured needs to prove an inability to engage in any occupation for which they are fitted to perform based on their education, training, and work experience.
Related Article: Clarifying Occupation in Disability Insurance: A Guide to Navigating Your ClaimSome policies also add an earnings qualifier, requiring the claimant to earn a certain percentage, such as 60% of pre-disability income. The insurance company will take into consideration the insured’s capability, not whether they are actually working. Also, insurance companies use earnings data compiled by the Bureau of Labor Statistics for various occupations are utilized to determine whether an occupation meets the wage guidelines.
Conditions that Limit the Duration of the Disability Benefits Payments
Benefit payments are limited to 24 months in duration most commonly for disabilities due to mental health conditions. Existing mental health parity laws apply only to health insurance. In the U.S., currently only Vermont prohibits disparate treatment of psychiatric disabilities. Only 1% of all group disability insurance policies are sold without such a limitation, and most individual policies also contain such limitations. Insurers also define the mental health conditions for which coverage is limited quite broadly – most policies would include any condition listed in the Diagnostic and Statistical Manual of Mental Disorders, a compendium of psychiatric disorders published by the American Psychiatric Association that also includes certain physical conditions that have psychiatric components. There may be means of challenging the application of the mental illness limitation; however, each case is unique in that regard.
Many disability insurers also limit benefits to 24 months for conditions that fall within a policy definition for “self-reported illnesses,” or a similar appellation. Such conditions may include chronic fatigue syndrome/myalgic encephalomyelitis, fibromyalgia, migraine headaches, or other conditions that cannot be verified by laboratory testing or radiologic examination. Again, there are sometimes ways to challenge insurers’ invocation of such limitations, but every case is different and involve differing circumstances.
Age at Onset of Disability
The maximum duration for benefit payments rarely goes beyond Social Security normal retirement age (67 for anyone born in 1960 or later), especially if the disability onset is near that age. Most policies contain a schedule that specifies the number of months of benefits the claimant can receive if they are at or near the maximum date when their disability begins.
Accident Versus Illness
For group disability benefits, it is rare that it would make any difference as to the duration of benefit payments whether the disability is due to an accident or sickness. However, many individual disability policies, especially older policies, specify that benefits are payable for lifetime if the disability is due to an accident, but only to a specified age such as 65 if the disability is due to sickness. Other policies, though, may provide lifetime benefits regardless of whether the disability is due to accident or sickness if the disability begins prior to a specified age, typically age 60. Ascertaining whether benefits are payable for lifetime may be found at the beginning of the policy where policy specifications are printed.
Catastrophic Disability
Some policies will also extend the duration of benefits if the insured suffers a catastrophic disability such as the loss of speech, hearing, eyesight, or limbs either due to amputation or if the limb is no longer functional. If the policy contains such provisions, the policy specifications will indicate the coverage, and the details are found in a rider or endorsement to the policy.
Social Security Disability
While rare, some policies will only pay benefits for a limited period if the insured fails to qualify for Social Security disability benefits. Given that it is a lengthy process to apply for Social Security disability benefits, it is advisable for insureds with relevant policy to submit their application for Social Security benefits as early as possible.
Concluding Thoughts
Disability insurance policies are complex, and it is not always easy to understand the terms of coverage, which often vary significantly from policy to policy. For anyone who becomes disabled, one of the most important questions that is of immediate concern is the duration of benefit payments. Benefit recipients need to know this information to plan their economic futures if they are not going to be returning to the workforce. Hiring an attorney who is knowledgeable in and experienced in handling disability benefits to help explain the policy requirements is often a good idea. The attorneys at DeBofsky Law have more than 40 years of experience in helping disability insurance claimants obtain benefits and understand how disability insurance policies work.
