Subject to Complete Defeasance has a great article about how Long Term Disability (LTD) insurance companies make you apply for Social Security benefits, including this snippet of a conversation with an insurance company:
Insurance Company [agent]: “Have you applied for Social Security disability benefits?”
You: “No.”
ICJ: “When do you plan on applying?”
You: “I don’t.”
ICJ: “Why not?”
You: “Well, I thought about that soon after my accident and talked it over with a lawyer. He said that filing a Social Security claim would be a waste of time, effort and money. Seems I don’t meet the agency’s rather stringent criteria for disability benefits, and in any event I’ll probably be back to work long before the agency rules on my claim. The money I’m getting under my disability policy will do me just fine until I’m back on the job.”
ICJ: “We disagree.”
You: “‘Scuse me?”
ICJ: “We disagree. We’ve reviewed your medical records and feel you have a good chance of getting Social Security benefits.”
Yup, long term disability insurance companies may make you apply for Social Security as part of your contract with them.
Why? Every dollar you get from Social Security, is a dollar the LTD carrier does not have to pay.
Even though you paid the insurance company to cover you, they may end up not having to pay you anything if you get Social Security benefits.
Also, if you are paid LTD benefits while you are waiting for your Social Security case to be decided, and you later win, you may have to pay back the LTD insurer for the money they paid you.
Keep in mind that all insurance policies are “creatures of contract.” That is, while there may be some regulation regarding what the policy has to say, it is difficult to generalize about policies. You have to read the policy to know what it says. You cannot just assume it says one thing or another.
I encourage you to read the entire article. But as a warning, the language gets a bit salty (maybe PG-13) when discussing the author’s frustration with the insurance company.
