Misconception #5: You Cannot Work While Receiving LTD Benefits

Fictional Conversation (overheard at a gym)

Person A: “If I ever need LTD, I’d just stop working completely. You can’t work at all if you’re on LTD, right?”

Person B: “That’s what I thought. It’s like the insurance company would want to see that you’re totally disabled and can’t do anything.”

Person A: “Right! I mean, what would be the point of paying you if you can still work?”

How to Overcome:

While some LTD policies may restrict working while receiving benefits, many allow individuals to return to work in a limited capacity (e.g., part-time or modified duties). These policies often provide a “rehabilitation” clause, which encourages claimants to gradually return to the workforce without immediately losing all their benefits. However, the individual must report any income earned during this period to the insurer.

To overcome this misconception, individuals should review their policy to understand what options are available if they want to return to work, even on a part-time or reduced basis. It’s crucial to disclose any income to the insurance company to avoid violating the terms of the policy.

Technicalities:

In Peacock v. Standard Life Assurance Company (2017), the court found that the insurer was wrong to terminate benefits solely because the claimant was working part-time. The claimant had been approved for LTD benefits due to a chronic condition but had returned to work on a limited basis as per the rehabilitation clauses of the policy. The court ruled that partial income earned through rehabilitation work should not result in the loss of benefits, particularly when the claimant was still disabled.