Long-term disability insurance protects you if you become disabled and can no longer work. At least, in theory.

In practice, many people find that when they go to use their disability insurance, their claim gets denied. That’s when it’s time to discuss your legal options. The next steps, however, depend on the type of insurance you have.

There are two basic types of long-term disability insurance:

  • ERISA Disability Insurance: Your employer provides ERISA disability insurance to you through an employee benefit plan.
  • Individual Disability Insurance: These are private insurance policies you individually purchase on your own.

Both types offer similar kinds of coverage. However, there can be significant differences in how they work—especially if you need to dispute a claim you believe is wrongfully denied. Here’s what you need to know.

What is ERISA?

“ERISA” stands for the Employee Retirement Income Security Act of 1974, the federal law that governs employee benefits.

Among many other things, ERISA spells out the specific requirements that employers and insurance companies have to follow to protect employees in the plan. That includes a detailed legal framework for resolving disputes when an insurance company denies a claim. Since ERISA is a federal law, those rules apply to ERISA-covered disability insurance in every state.

If you filed a claim you believe was wrongfully denied, ERISA lays out an appeal process that you and your insurer have to follow. Through each step of the process, the insurer is required to provide precise information and ensure you receive a full and fair review. If you can’t reach an agreement, you and your attorney can pursue the insurance company in federal court to attempt to overturn the denial and receive your benefits.

What is Individual Disability Insurance?

Getting coverage through your employer is not the only way to get long-term disability insurance. You can also buy an individual policy directly from an insurance company the same way you would purchase life or auto insurance.

If you purchased long-term disability insurance yourself, your policy is not governed by ERISA. That doesn’t mean you have no recourse if your claim is wrongfully denied.

If you purchased long-term disability insurance yourself, your policy is not governed by ERISA. That doesn’t mean you have no recourse if your claim is wrongfully denied. You still have the right to appeal that decision. However, because individual policies are not governed by ERISA, the appeal process is covered by state laws, which can differ from state to state.

In some cases, individual policies give you more options to resolve a dispute. With ERISA plans, every dispute must follow the same rigid rules. You do have the right to sue in federal court, but it can take a long time to work through the process to get a denial overturned and receive your benefits.

If you have an individually-purchased policy and the insurer denies your claim, you may be able to sue in state court immediately. Under many states’ laws, if the insurer wrongfully denied your claim, you may also be eligible for punitive damages.

The three types of disability coverage

Whether you have ERISA or Individual Disability Insurance, you likely have one of three basic types of coverage:

Own Occupation

This type of insurance provides benefits if you become unable to perform your current job. You might still be able to work another job, but if you have a disabling condition that prevents you from performing the functions of your “own occupation,” you are entitled to benefits.

Any Occupation

This type of insurance provides benefits only if you cannot perform any job. Sometimes, this type of insurance contains an income qualifier that protects your level of income if you become disabled. You may still be able to work. However, if the job you have now doesn’t pay as much as your pre-disability income (usually at least 60-80 percent), you’re entitled to benefits.

Own and Any Occupation

Most disability insurance is a combination of the two, covering your ability to work your own occupation for the first 24 months of disability, and after that, only paying if you are unable to work in any occupation.

What should you do if your claim has been wrongfully denied?

If your disability claim has been wrongfully denied, you have a right to appeal that decision and receive the benefits that are rightfully yours. This is true no matter what type of insurance policy you have. However, the laws and regulations governing appeals are incredibly complicated. If you make an error or miss an important deadline, you might not have a chance to fix that mistake.

Whether you have ERISA or Individual Disability Insurance, you should speak with a legal advisor who specializes in disability insurance law. Working with an experienced disability attorney who knows this complex area of law inside and out is one of the best decisions you can make.

Has your disability claim been wrongfully denied? Feel free to contact us directly with your questions!

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