Confused about the differences between group and individual long-term disability insurance coverage? You’re not alone. Understanding the nuances of these insurance options can be daunting, but we can help you understand the differences and why it is almost always better to have an individual policy.
Understanding the Differences Between Group and Individual Disability Insurance
One major difference is that individual policies are underwritten for the individual purchasing the coverage, while group policies are not individually underwritten. Instead, group policies are issued by disability insurance companies based on certain underwriting assumptions regarding the general health of a group of people.
Individual policies are typically purchased and paid for by the policyholder independently of their employer. Conversely, group insurance is usually provided by an employer or a union, with premiums usually paid in whole or in part by the employer. There may be situations where an employer pays the premiums for an individual policy on behalf of an employee.
Alternatively, an individual may independently obtain group long-term disability (LTD) coverage by becoming a member of a group that offers such coverage to its members. If you pay the insurance premiums yourself, your monthly benefits are usually tax-free. However, if your employer pays the premiums, you may have to pay taxes on the benefits you receive.
Group vs. Individual Disability Lawsuits
If coverage is provided under a group policy through the insured’s employer, the policy is likely to be governed by the Employee Retirement Income Security Act (ERISA). Policies governed by ERISA preempt certain state consumer protection laws. There are significant differences between a lawsuit involving an ERISA LTD plan and an individual disability income policy.
The plaintiff is entitled to a jury trial in state court in an individual disability policy lawsuit. An ERISA claimant, however, does not have this right. A federal judge determines the outcome of an ERISA disability lawsuit, usually after both parties have submitted written briefs supporting their arguments for summary judgment.
In addition, in a state court action for wrongful denial of benefits under an individual disability insurance policy, the plaintiff may be entitled to additional damages for bad faith on the part of the insurance company. If ERISA governs the LTD plan, the insurance company faces no risk of bad faith or punitive damages for wrongful denial of LTD benefits in an ERISA group plan claim, which provides no significant incentive to settle the claim.
If the claimant wins a federal ERISA lawsuit, the insurance company’s potential liability is limited to paying the claimant’s past-due benefits and, in some cases, interest and attorneys’ fees (although obtaining an award of attorneys’ fees for the prevailing party can be a challenge in most federal circuits).
RELATED VIDEO: Group Plan vs. Individual Disability Insurance Policy
Get Help with Your Long-Term Disability Claim
If your long-term disability claim has been wrongfully denied or terminated, the Ortiz Law Firm can help you get the benefits you deserve. Call us at (888) 321-8131 to schedule your free case evaluation with national long-term disability attorney Nick Ortiz.
