Disability Insurance?
If I have disability insurance through my job and I also have independent disability insurance, will each insurance pay me the amount I am entitled too if I was to become disabled?
Public Comments
- No. The way this works is that one insurance acts as the 'primary' and the other works as the 'secondary'. If the primary runs out then the secondary will kick in. They won't pay you at the same time.
- There are two types of disability insurance - short-term and long-term. Short term usually starts from day one and pays up to 6 months. Long-term disability usually starts paying out after 6 months and can provide up till age 65 if you setup the policy that way. Most long-term disability plans pay a certain percent of your income. You should review your policies to see what coverage you really have.
- Usually disability insurance provided by employers only covers you for a year or so. In that case you need both policies. However if you are paying for long term disability insurance twice, you will see, if you read the policies, that they take into account other sources of disability income. So you won't be paid twice, but, if you the policies allow, you might be able to replace 100% of your income if you are disabled - most policies only replace a percentage, such as 80%. However, this insurance is expensive and it might not be worth it to just cover the missing 20%.
- Yes. Contractually, both insurers are obligated to pay the monthly, weekly or daily benefit amount, provided the cause of your disability is covered under the policies. Policies of this type do not have "Coordination of Benefits" clauses, so there is no "primary" and "secondary" insurer. Also, disability benefits received under this type of policy is NOT considered "income" in terms of benefits. (Whether the IRS believes it's income is a separate issue.) In other words, insurer 1 can't view insurer 2's benefits as income and reduce your benefits. Look in the "definitions" section of your policy/Certificate of insurance for the definition of "income." It'll explain an insurer is only concerned with EARNED income. Since disability insurance payments are not earned, it's not income. One disclaimer: if you are approved for Social Security Disability, one or both of your policies may require you to repay a percentage of the insurance benefits. Read both policies carefully to see if either contains such a clause.
