You should periodically check your school’s group long term disability (LTD) policy to ensure it’s best suited to serve your school’s employees.
Unlike your group life insurance policy, group LTD insurance has many benefit nuances. Life insurance is not complicated—upon death, a specified benefit is paid to the designated beneficiary.
Disabilities are rarely as straightforward. Issues that impact claims include limited return to work, claim recurrence, how disability is defined in terms of loss of duties or income, and more.
It can be overwhelming, so here are three places to start when checking your school’s LTD policy.
- Fully understand your policy’s definition of disability. Most LTD plans require both loss of earnings AND loss of ability to fulfill duties to be eligible for benefits. A policy that reads “loss of earnings OR loss of duties” is better because it allows for payment of benefits to an employee who must, because of disability, have a significant shift in duties. For example, a senior faculty member who is also Department Chair and a coach may be medically required to give up all non-teaching duties. As a result, salary is significantly reduced, but the employee still works enough hours to be considered 100% full-time equivalent. With an “and” definition, the claim would likely be denied. With an “or” definition, the employee would qualify for partial disability benefits because of loss of earnings, even though the employee is still full-time.
- Confirm when employees are covered. Are your employees covered during the summer months? How about during sabbatical leave? Many schools have teachers who are under contract for less than 12 months (typically September 1 through June 30). If so, they may not be covered if they become disabled in July or August. Make sure you have written verification from the carrier that employees who are not under contract during the summer are still insured. Or consider placing all salaried employees under 12-month contracts. If you have a formal sabbatical program and you want to continue covering an employee during sabbatical leave, formally add policy language to permit this.
- Clarify the definition of “occupation.” Group LTD policies also distinguish between the inability to perform one's own occupation and the inability to perform any occupation for which one is trained, educated, or experienced. The "own occupation" part of the definition normally limits benefits for a period of up to 24 or 36 months before reverting to the "any occupation" definition. Some policies allow you to extend the own-occupation benefit period to Social Security normal retirement age. However, the cost of having this extended definition of disability is high, with premium surcharged by 20% or more. ISM’s experience has been that independent school faculty and staff are committed to their profession. The likelihood of an employee still being unable to do his or her own occupation after two or three years—but being able to do other jobs commensurate with his or her training, education, or experience—is remote.
It’s important to do your research and confirm that your policy makes sense for your mission and your school.
Have questions about your school’s group long term disability policy? We’re happy to help. Learn more here, send an email to Independent School Group Insurance Trust Lori Leonard, or call 302-656-4944 for more details.
Additional ISM Resources:
The Source for Business and Operations Vol. 16 No. 7 Ensure Your Long Term Disability Benefits Are Right for Your Community
Additional ISM resources for members:
I&P Vol. 37 No. 12 Key Advice on Shaping Your Employee Health Benefits Plans
