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If you’re unable to work because of an illness or injury, you may be eligible for more than one type of benefit. Two of the most common are long-term disability (LTD) insurance and workers’ compensation (WC). While it’s possible to get both, it’s important to understand how these benefits work together—especially how one can affect the other.
Understanding the Basics
What Is Long-Term Disability Insurance?
Long-term disability insurance is usually provided as a group benefit through your employer or purchased individually. It replaces a portion of your income—often 50% to 70%—if you’re unable to work due to a disability, whether or not the injury or illness is work-related.
What Is Workers’ Compensation?
Workers’ compensation is a state-regulated program that provides benefits to employees who suffer work-related injuries or illnesses. It typically covers:
- Medical expenses
- Partial wage replacement
- Rehabilitation or retraining
- Compensation for permanent impairments
Can I Get Both LTD and Workers’ Compensation?
In short, yes—but with some limitations. Most LTD policies will reduce your monthly benefit if you’re also receiving workers’ compensation benefits.
This is called an offset, and it’s a standard feature of many LTD policies. The idea is to prevent you from collecting more in combined benefits than you would have earned while working.
Example of How Offsets Work
Let’s say your pre-disability income was $5,000 per month. Your LTD policy pays 60% of that, or $3,000 per month.
Now suppose you also qualify for $2,000 per month in workers’ compensation wage replacement. Your LTD carrier would subtract that $2,000 from the $3,000 it would otherwise pay, leaving you with only $1,000 from LTD.
Important Things to Keep in Mind
Lump Sum Workers’ Compensation Settlements
If you settle your workers’ comp claim for a lump sum, your LTD carrier may still reduce your benefits. They often calculate a “monthly equivalent” of your settlement to apply the offset. It’s important to have someone review the terms of the settlement to understand how it will affect your LTD benefits.
Tax Considerations
- Workers’ comp benefits are generally not taxable.
- Whether LTD benefits are taxable depends on how the premiums were paid. If your employer paid the premiums, the benefits are probably taxable. If you paid them with after-tax dollars, the benefits are usually tax-free.
Policy Language Is Everything
Not all LTD policies are created equal. Some have broader offset provisions that include:
- Social Security disability benefits
- Third party settlements
- Retirement or pension income
Review your policy carefully, or have an attorney review it, so you know what to expect.
Timing and Claim Coordination
LTD and WC claims may be processed at different times. You could be approved for one and still waiting for the other. Be sure to keep both insurers informed and keep clear records of all communications and decisions.
When to Talk to an Attorney
If your long-term disability claim has been denied, the Ortiz Law Firm can help. We focus exclusively on SSDI claims and LTD appeals and lawsuits, and we’re here to make sure your rights are protected every step of the way. Contact us online or call (888) 321-8131 today to schedule a free case evaluation.
