If your employer goes out of business, the future of your long-term disability (LTD) insurance depends on how your policy is structured. Here’s a breakdown of what typically happens:
Employer-Provided Group LTD Policy
If your LTD coverage was part of a group plan provided by your employer, it’s likely that:
- The coverage ends when the company shuts down. Group plans are usually tied to your employment status. Once you’re no longer employed because the company ceases to exist, the plan typically terminates.
- No more premiums are paid. Since the employer is no longer operational, they’re not paying premiums. Without those payments, coverage usually lapses unless you have an option to convert the policy.
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Conversion Options
Some group LTD policies include a conversion privilege, which allows you to convert your group policy into an individual one:
- This usually needs to be done within a limited time window (often 30-60 days after coverage ends).
- Premiums on individual policies are typically higher.
- Not all group policies offer this option, so you’ll need to check your plan documents.
If You’re Already on a Claim
If you were already receiving LTD benefits when your employer went out of business:
- Your benefits should continue. LTD insurance is typically administered by a third-party insurance company, not the employer itself. As long as premiums were paid and your claim was approved before the company folded, the insurer is still obligated to continue benefits.
- That said, you may run into issues, like delays or confusion, if records or HR contacts are no longer available. Keep all documentation related to your claim and policy.
Self-Funded Plans
If your employer used a self-funded plan (less common for LTD), they were paying claims directly rather than through an insurance company. In this case:
- If the company goes bankrupt, benefits may stop unless the bankruptcy court sets aside funds.
- These claims can become complicated and may require legal help to pursue further benefits.
If your claim has been denied or your benefits are suddenly stopped, it may be a good idea to talk to a long-term disability attorney. Ortiz Law Firm helps individuals navigate complex disability claim denials. Call (888) 321-8131 or contact us online if you need help understanding your options.
RELATED POST: What Is ERISA And How Does It Affect My LTD Claim?
