Social Security Disability and Long Term Disability Insurance: Good and Bad

You suffer a physical injury. You are out of work. You live paycheck to paycheck so you decide to return to work. However, you find you cannot continue. You have long term disability coverage. You apply and you start receiving benefits. Great! The insurance company tells you that you must apply for Social Security disability benefits. They even have people who will represent you or at least help you with the application. You get payments while you wait for your Social Security case to get to a hearing. Considering it can take up to two years or more from the time you apply for Social Security disability benefits to get a hearing and possibly get approved, getting payments in the meantime sounds good, right?

Well, the problem is what the insurance company does not tell you. Every long term disability policy I have read contains a reimbursement clause. You agree to reimburse the insurance carrier for money they pay you if you are awarded a lump sum award of back benefits from the Social Security Administration. They don’t give you your insurance premiums back though. You paid for the insurance, should they not pay you back since you have to pay them back? Why should you have to reimburse them? You paid for the insurance coverage. The insurance contract controls.

With the recent election and talk of excessive government spending why should you have to apply for Social Security disability benefits? Well, for two reasons. One, if you do not apply and you stay out of work for more than five years you will lose your insured status. The Social Security Administration (SSA) makes its own determination of your disability. The decision that you are disabled made by the insurance company is evidence in your Social Security case, but it is not dispositive. It is possible that the SSA finds that you became disabled, but not until after your date last insured. In that case, you would not qualify for Social Security disability benefits. Two, if you wait more than one year to apply for Social Security disability benefits from the time you stopped working, you lose benefits if you are successful in your claim. You can only get benefits up to 12 months prior to your application date for a Social Security disability claim.

I believe in situations where there is long term disability insurance in place, the Social Security Administration should change the regulations so that a person could retain their qualifications in order to apply for Social Security disability benefits at a later date, if needed.