How is Long-Term Disability Calculated?
The rate of long-term disability is calculated according to the terms of the policy. Certain types of policies may have a maximum amount of long-term disability payable as determined by diagnosis or type of disability. The monthly rate of long-term disability is calculated by taking a percentage of the basic gross, monthly salary. The basic salary rate does not include overtime pay, bonuses or commission. The percentage of base salary to calculate the long-term disability rate is set out in the policy. The usual percentage is 66.66% of the gross monthly income.
If the rate is calculated on gross income, the long-term disability benefit is taxable. The long-term disability benefit may be taxable or not depending on the terms of the policy and the method of calculating the benefit.
Are You Entitled to Long-Term Disability Benefits?
Employees with long-term disability (LTD) coverage through their employer or union typically participate in a group coverage plan provided by an insurance company. In some cases, self-employed individuals may purchase their own LTD policy from an insurer. The terms of the policy are usually negotiated between the insurance company and the employer, or through a collective bargaining agreement for union members. Employees who are part of this group coverage are considered beneficiaries and are eligible for LTD benefits, provided they meet the specific terms and conditions outlined in the policy.
Each LTD policy can differ in its details, so employees should first request a copy of the policy from their employer to fully understand their rights and entitlements to LTD benefits. Although employees may believe they are entitled to LTD benefits, their claim might not meet the exact requirements or definitions laid out in the policy. This can lead to potential disputes between the employee and the insurance company regarding unclear language or differing interpretations of the policy’s terms.
LTD benefits are generally calculated based on the terms of the individual policy, which may include a percentage of the employee’s pre-disability income, subject to any caps or reductions specified by the insurer.
Read the Policy Carefully
A careful review of the terms of the policy will provide important information to understand entitlement to long-term disability. The policy will have separate sections which apply to claims for disability benefits or long-term disability benefits. The policy will also have a section entitled “definitions”. It is not necessary to read the entire policy as only these two particular sections are required to understand your coverage for long-term disability benefits. These sections of the policy contain vital information condensed into only a few pages.
Although all the important information is contained in the policy, the language used in the policy can be difficult to understand. It is also important to review the definitions section of the policy to assist you in understanding the terminology found in the policy. Despite thoughtful drafting of the policy, ambiguities do arise and may require judicial interpretation.
The policy will determine the length of the elimination period, definitions of disability, and how long-term disability is calculated.
Need More Help?
Disputes do not usually arise from how long-term disability is calculated since the method of calculation is usually clear in the policy. Most disputes concerning whether or not a claimant meets the definition of disabled within the meaning of the policy. This can be confusing. Contacting an experienced disability lawyer can help you navigate this process and get you the benefits you deserve.
