Long Term Disability insurance policies fall into one of two types: (1) individual and (2) group.
1. Individual Disability Insurance Policies
Individual disability insurance policies are policies consumers purchase directly from the insurance company. They provide income replacement if the policy-holder becomes sick or injured.
Individual policies typically fall into two categories: “general” and “occupational.” A general disability policy provides coverage where sickness or injury prevents the policyholder from performing any and all work. An occupational policy provides relief if the policy-holder cannot perform the material and substantial duties of his or her own occupation. Individual policies typically provide coverage in set amounts, such as $5,000 or $10,000 per month, instead of paying a percentage of the insured’s salary.
An occupational policy is preferred coverage for the insured, as it provides coverage even if the insured is capable of performing another occupation.
2. Group Disability Insurance Policies
If you purchased your long-term disability policy through your employer or received your long-term disability coverage as an employee “fringe” benefit, then your disability policy is almost always subject to ERISA regulations. ERISA is a very complex federal statute which sets forth claim handling procedures that insurance companies must follow when evaluating and administering a long-term disability claim.
Note: Some group disability policies are exempt from ERISA, such as if you are a government employee, church employee, or if you purchased your policy through a group or association which is not your employer.