No one plans on being disabled. Whether you purchased a policy or you have one provided by your provider, you probably don’t remember how much in benefits your LTD policy will pay if you are unable to work. However, the answer to this question is critical if you want to avoid a financial crisis. Disability lawyer Emmett B. Irwin works with injured workers and their families to ensure they get the benefits they deserve.
LTD Benefits Will Not Cover Your Entire Income in Maryland
Most LTD policies will cover anywhere from 60% to 80% of your gross monthly earnings before you became disabled. Your policy should clearly state what portion of your income it will cover, but it isn’t always easy to find.
Understanding what portion of your income will be covered is essential. However, it is also important to calculate your monthly gross income correctly. Most policies cover your base compensation only, whereas others may include bonuses, commissions, and overtime.
Unfortunately, the answer to these questions will vary from policy to policy. If you have an employer-provided LTD policy, they may be able to provide some guidance. Otherwise, the insurance agent you purchased the policy from can help, or you can consult with an experienced disability attorney.
LTD Will Be Offset by Other Benefits
If you receive other benefits such as Social Security disability benefits, you should be aware that your disability benefits will be offset by the other amounts you receive. In other words, if you are entitled to receive a monthly LTD benefit of $5,000, that is the total amount of disability benefits you can receive. However, if you are later awarded $2,000 in Social Security disability benefits, your LTD benefit will be reduced to $3,000.
Cost of Living Adjustments
Many LTD benefits have an annual cost of living adjustment. This adjustment usually tracks a well-known index such as the Consumer Price Index. An adjustment is likely to increase your monthly benefit amount, as the cost of living rarely decreases.
Returning to work can have a significant impact on your monthly disability benefits. First, you need to review your policy and determine whether being able to work at all jeopardizes your benefits. If your policy pays benefits, if you cannot work in your “own occupation,” working a different job for less pay won’t likely disqualify you from receiving further benefits. Otherwise, your LTD benefits may be offset by any income you earn.
Taxes in Maryland
While taxes don’t necessarily affect your monthly benefit amount, it is essential to consider how your benefit payments will be treated for tax purposes. If your LTD policy was paid for with pre-tax dollars (such as with many employer-provided LTD policies), your benefits would be taxed with ordinary income. However, if you purchased your policy with after-tax dollars, your benefits are not taxable. The situation is more complicated if you and your employer split the cost of your premiums.