Long-term disability income insurance (LTD) replaces a percentage of an individual’s pre-disability income when he or she is forced to leave work before retirement due to a covered disability. Most people who have disability insurance are on employer-sponsored group plans, which can be valuable but tend to offer more limited coverage and benefits compared with individual insurance policies. Coordinating LTD with other personal insurance is one of the most common strategies for expanding coverage and enhancing benefits. Stacking disability and other insurance, by purchasing policy riders or supplements, can significantly increase an individual’s protection against loss of income. However, when managed ineffectively, employer LTD interaction with private insurance policies can lead to expensive premiums with minimal increase in benefits. Planning carefully and evaluating the exclusions, benefit period, and other specific factors of each policy can help individuals considering private plans coordinate their long-term disability with personal insurance policies more efficiently.
What Is the Coordination of Benefits With Two Insurances?
There are a number of situations in which a single person might be covered by more than one insurance policy for the same concern. Some of the most common examples relate to health insurance. You may have sometimes needed to check a box on the sign-in form at a doctor’s office, indicating whether you have any “additional insurance.” Additional health insurance is particularly common in households with two wage earners, each of whom has insurance through his or her job, and is also common across households when divorced co-parents each maintain some health insurance on their shared children. Usually, the individual policies will have somewhat different benefits and copays.
Theoretically, whenever one of these policies offers a needed benefit that the other policy does not, such as coverage for a particular diagnostic procedure, then the covered person can take advantage of those benefits under one policy when the same medical need might be denied under the other policy. On the other hand, sometimes both policies offer coverage. The management of co-existing insurance policies, especially when they overlap in their coverage and benefits, is called the coordination of benefits (COB). When effective, COB can help to ensure that policyholders have access to the full range of benefits specified under either policy, while avoiding potential problems such as accidental double billing. Not surprisingly, however, COB problems and discrepancies do sometimes arise, and they can often be highly disruptive and stressful until resolved.
Do You Lose Health Insurance on Long-Term Disability?
If your long-term disability insurance was part of an employee benefit plan for a job you have left due to your disability, it is likely that your health insurance may have been linked to this job as well. Even if your long-term disability benefits are fully approved under the terms of the group plan through your former employer, meaning you maintain a connection to the insurance company providing that benefit, you will not be able to take the health insurance plan that was also formerly part of an employee compensation package with you.
The prospect of losing your health insurance can be stressful, especially if you rely on it heavily to cover treatment for the same condition that has forced you to leave your job. However, you may be able to enroll in one of the temporary continuation of coverage policies that most group health insurance plans are required to offer under the Consolidated Omnibus Budget Reconciliation Act (COBRA), or to enroll in a new individual policy through the Affordable Care Act (ACA) Marketplace. If your family members also had health insurance through your job, they may be eligible to enroll as well.
LTD Interaction With Private Insurance Policies: Can You Be Covered by Two Insurances at the Same Time?
Many people wonder whether stacking disability and other insurance is practical, or even legal. The short answer is that coordinating LTD with other personal insurance can be a practical solution to a number of problems when the LTD interaction with private insurance policies is managed effectively, and that there is nothing illegal about purchasing additional coverage as long as you are not attempting to avoid disclosures, such as reporting of additional income sources and amounts, required by the terms of any of the policies. The longer answer is that the personal insurance policies you select, and how you pay for the premiums, can have an enormous impact on whether stacking long-term disability with personal insurance turns out to be an efficient strategy in your own case.
LTD Interaction With Private Insurance Policies: What To Avoid
Just as happens with health insurance COB, in coordinating LTD with other personal insurance policies the greatest advantages of having more than one policy show up when two policies offer slightly different coverage and benefits. Usually, the main reason for selecting a fully-fledged personal LTD policy would be either that you already had the coverage before you started your current job and do not want to trigger a new exclusion period or “look-back” period for pre-existing conditions, or that your employer’s policy offers less robust coverage than you need to secure your peace of mind. What you want to avoid is a situation in which each policy’s offset provisions cancel the other’s benefits, particularly if you are carrying the full cost of premiums.
Employer LTD Interaction With Private Insurance Policies: What If You Already Have Private Disability Insurance?
If you already have coverage you do not want to lose, and your new employer’s group plan looks inferior, then an alternative to stacking group long-term disability with personal insurance may be to ask the employer’s benefit coordinator if there are options for selecting a different form of compensation instead. Depending on the rules at your workplace, your employer’s human resources (HR) team may be open to adding the equivalent value of the premiums to your pay, adding them to the contributions the company makes to your employee retirement plan, or otherwise providing you with a benefit that equates to a roughly similar investment by the company that better suits your personal situation.
Group Plan Considerations: Coordinating LTD With Other Personal Insurance
You may also wish to consider reaching out to your employer’s HR department if the company provides LTD but you would like additional coverage. Premium rates on the individual market tend to be higher than those associated with group plans, so before selecting a policy directly from an insurance company it may make sense to speak with a benefit coordinator at your company to determine if purchasing a supplemental policy through the same insurer, in combination with the group plan, may be an option.
Often the COB can be easier when a primary insurance policy and a supplementary insurance policy are through the same insurance company. Additionally, going through your employer’s HR department can help to ensure that the supplemental policy is designed to work in combination with the particular group plan that covers your organization’s employees.
Group Plan Long-Term Disability With Private Insurance: Filling Gaps in Coverage
If a primary concern in managing LTD interaction with private insurance policies is to avoid overlaps that add no benefit beyond what is covered in either policy, then a major goal of stacking disability and other insurance is often closing in the gaps left by an employer-sponsored group long-term disability insurance plan. Group plan LTD tends to pay a lower percentage of an individual’s pre-disability income than is common for private disability policies. However, you do not necessarily need to purchase a standalone disability insurance policy if there are LTD options through your employer.
Even if your employer’s HR team is not able to facilitate the purchase of a supplementary disability insurance policy or riders for additional coverage, you may be able to purchase an individual policy on the consumer market that is intended to fill in the gaps left by many employer-sponsored group plans. An individual supplement may not be directly tailored to the precise gaps in your group plan, and the COB may sometimes be more complicated than with a rider purchased through your employer, particularly if your supplementary policy is with a different insurance company. However, coordinating LTD with other personal insurance in this way can often close gaps in coverage for excluded conditions, extend benefit periods, and expand qualifying conditions to ensure eligibility for own-occupation vs. any-occupation disability.
Understand Your Options for Stacking Disability and Other Insurance
Coordinating LTD with other personal insurance can be an effective strategy for ensuring that benefits will be available if you ever need them. However, LTD interaction with private insurance policies can sometimes mean that if stacking disability and other insurance is not managed properly, you may “double up” on premiums for a set of benefits that largely cancel each other out. Working closely with your employer’s HR team to evaluate options for adding riders or supplementary policies to your group plan is a solid first step toward coordinating long-term disability with personal insurance. If none of the options available through your employer look like a fit for your needs, you may wish to expand your search to consider supplementary policies sold directly by insurance companies. This can be a valuable decision, but it can also sometimes complicate the LTD interaction with private insurance policies, so consider speaking with industry professionals, including disability lawyers, who can help you review policy terms and how their offsets and exclusions complement your existing disability insurance, before you choose a plan.
