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Long-term disability policies are unlike any other type of insurance. As an employee, you often don't have the choice between several companies with different types of coverage. Employees are typically stuck with whichever policy their Human Resources Department has chosen for the company. And while many companies pick responsible, well-written policies, there are just as many irresponsible businesses who choose the cheapest policy they can find. 

Also, unlike your car insurance, homeowner's insurance, or life insurance policy, which are subject to state regulation, there is absolutely no governmental oversight for employer-sponsored long-term disability policies. That's right, while your state has a whole department dedicated to reviewing and approving every other type of insurance policy imaginable - flood, fire, casualty, car, boat, life - there is not a single person whose job is to review the language in your employer's long-term disability policy. 

Even worse, recent decisions from the Supreme Court of the United States have practically granted immunity to these companies. In fact, according to the 8th Circuit Court of Appeals, the burden is now on a plaintiff to show that his plan administrator "acted dishonestly, acted from an improper motive, or failed to use judgment in reaching a decision."

So Who's Looking Out For You? 

Why some policies have bad language and what you can do to protect yourself.The state hasn't reviewed the policy that your company purchased. You can't negotiate any of the terms of your policy on your own. Certain irresponsible HR departments simply select the cheapest policy they can find without reading the terms or consulting an experienced attorney about the consequences of those terms. And all the plan administrator has to do is keep from acting dishonestly.

Get your disability insurance policy out right now. Sit down and actually read through it. If you find any of the following language in the policy, the policy isn't protecting you in the ways that you and the HR department think it is. Run and scream to your Human Resources Administrator or find your own private policy if you see:

  • Any language granting the insurance company "discretion" to determine your benefits;
  • A definition of disability that requires that you not be able to perform "each and every" important function of your job before being paid benefits;
  • An "own occupation" period of less than two years;
  • Income protection of less than 60% of your prior year's earnings;
  • Language terminating all benefits if you are "able to work part time, but don't;"
  • Blatant discrimination against the mentally ill;
  • Limitations on disabilities caused by so-called "self-reporting symptoms;"
  • Benefits that are contingent upon securing Social Security disability benefits; or
  • A limitation on benefits for fibromyalgia or chronic fatigue syndrome.

If these terms are in your policy it means one of two things. First, whoever made the decision to purchase your company's long term disability policy did not actually read the terms. Second, if they did read the terms, it means they didn't understand them. Why? Because your policy only bought you the illusion of protection.

Ben Glass
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Ben Glass is a nationally recognized ERISA disability & life insurance attorney in Fairfax, VA.