How is Long Term Disability Calculated?

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 coverage through their employer or union belong to a group coverage policy with an insurance company. Sometimes, self-employed individuals have their own policy for long-term disability with an insurer. The policy is usually negotiated between the insurance company and the employer or collective bargaining agreement for union members. The employees are beneficiaries of the group policy and are entitled to long-term disability benefits if they satisfy the terms and definitions of the policy. The long-term disability is calculated according to the terms of the policy.

Every policy for long-term disability coverage is different and an employee should first obtain a copy of the policy from his or her employer to understand their entitlement to long-term disability. Although an employee may believe he or she is entitled to long-term disability benefits, their claim may not exactly fit into the definitions of the policy. A dispute may arise between the employee and the insurance company regarding ambiguities within the meaning or interpretation of the policy.

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.

Updated content: Originally published May 15, 2018