Too many American families depend solely on disability insurance obtained through employer-provided group policies, Quadrino noted. Group policies often contain significant limitations in coverage that employees don’t fully grasp until the coverage is needed. When catastrophe strikes, privately purchased disability insurance policies offer better quality benefits that can mean the difference between maintaining a family’s lifestyle or facing severe economic hardship.
Group employer-sponsored plans typically provide much less coverage than is needed, said Quadrino. So if a person is covered under a group disability plan but cannot qualify for federal Social Security disability benefits or workers’ compensation benefits (only for those injured on the job) she must survive economically while dealing with a reduced earning capacity and little to no monthly disability insurance benefits on a medium to long-term basis.
“Due to a two-year cutoff rule and limited coverage for psychological trauma, workers insured under these group disability plans will likely have big burdens to contend with in a relatively short time horizon,” said Quadrino. The vast majority of group disability policies only provide good coverage during the first two years of a disability. During this initial time frame, the group insurance can operate in the same fashion as a privately purchased insurance policy.
The standard for obtaining monthly benefits in the first two years is whether the person can perform the “material and substantial duties” of her current occupation. But unlike privately purchased polices, after the two-year mark the definition of what is considered a disability markedly changes in group policies, causing the termination of benefits in many cases.
After the two-year mark, a person with significant injuries may not be able to return to his/her prior occupation. Many who lost legs or feet, for example, could be unable to perform prior jobs, even with assistance of prosthetic devices (e.g., a police officer, first responder, or other physically demanding job requiring the use of lower body strength and dexterity). Under a typical post two-year definition of disability in a group policy, the disabled person would not receive further monthly disability insurance payments if able to obtain work in any occupation the insurance company deems reasonably fitted for, based on education, training or experience.
This typically means, according to disability insurers, monthly benefits end if there is any type of job the person is qualified for, even if it means a low paying job that the person is overqualified to perform. Most group disability policies also have a two-year cutoff for claims based upon psychological conditions. Private policies typically place no limit on the payment of such claims. There will likely be some group disability claims by Boston victims suffering from post-traumatic stress disorder or depression induced by trauma that will be terminated after 24 months of payments.
“Many families impacted by the Boston tragedy will likely need to downsize their living arrangements, alter retirement planning, or find multiple part-time low wage jobs just to survive,” said Quadrino. For those with privately purchased disability insurance, however, their odds of obtaining sufficient and extended insurance benefits are much higher, with long term benefits typically payable to age 65 in such policies.