How much should disability insurance cost

how much should disability insurance cost

Long Term Disability Articles

If you’re having a dispute with your long-term disability insurance company, you may want to hire a lawyer to represent you in a hearing against the insurance company. Fortunately, you don’t have to pay a “retainer” when you hire an LTD lawyer, and in fact, you don’t usually have to pay an LTD lawyer anything unless you win your case.

Contingent Attorneys’ Fees

Most long-term disability lawyers operate on a "contingency" basis. This means that if you win long-term disability benefits, your lawyer’s fee will come out of the benefits you win. If you are denied benefits, you don’t have to pay the lawyer’s fee (though you may have to pay costs--see below). Most LTD attorneys will want  25% to 40% of your LTD benefits, but this amount is negotiable. Shop around until you find lawyer who will take 25% to 30% of your benefits rather than 35% to 40%.

Percentage of What Amount?

Many LTD cases settle for a lump sum payment that represents the future long-term benefits the insurance company would have paid you (in monthly payments) as well as back payments of benefits that the company owes you. If you take a lump sum settlement, your attorney will take 25% to 40% of that amount.

If you don’t receive a lump sum, your attorney may want to receive a percentage of your future monthly payments. Make sure you discuss this beforehand. You may want to try to limit the attorney’s fee to just a percentage of your back payments, or negotiate a limit on the number of future payments you attorney can take a percentage of.

When the Insurance Company Has to Pay Your Attorney’s Fee

If you have to take your case to federal court, sometimes a federal judge will order the long-term disability company to pay your attorneys’ fees. (If you want to sue the insurance company, you must do it in federal court if it’s a group insurance policy provided by your employer, because these policies are governed by ERISA (Employee Retirement Income Security Act), a federal law.)

If the insurance company acted in bad faith in denying

your benefits or in underpaying you, and your side of the case has merit, it’s possible the federal judge will order the company to pay your attorneys’ fees (but only those related to the federal litigation).

If you purchased your insurance policy as an individual, the judge will rarely order the company to pay your attorney’s fees, even if the LTD company acted in bad faith and you won the case.

Expenses Related to Your Case

You will usually need to pay the out-of-pocket costs the LTD lawyer spends on your case. This includes thing like copying fees, court filing fees, fees for your medical records, postage, and travel expenses. Before you hire a lawyer, make sure he or she provides a written agreement that states exactly what fees you will be responsible for, whether you win or lose the case.

Attorneys' Fees for Social Security Disability 

Some LTD disability lawyers also handle Social Security disability cases. And in fact, most long-term disability policies require you to apply for Social Security disability because they are allowed to “offset” your LTD benefits by the amount of your Social Security disability benefits (that is, pay you less).

If you're receiving long-term disability (LTD) insurance benefits and then you're approved for Social Security disability benefits, your LTD policy likely allows your insurance company to reduce your LTD payments dollar-for-dollar by the amount you receive from Social Security, as well as take all of your Social Security disability backpay. The reasoning is that the insurer was overpaying you for the months you received the full amounts of LTD, since the insurer is allowed to offset your benefits.

Attorneys' fees for your Social Security disability lawyer are taken out of your Social Security backpay before you get it, so your LTD company is not entitled to this part of your backpay. This allows many Social Security disability claimants to essentially hire a Social Security disability lawyer for free, when they already are receiving LTD benefits. For more information, see Nolo's article on when a long-term disability company can take your Social Security benefits  and how much a Social Security disability lawyer costs .

Additional Questions and Answers


Category: Insurance

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