Collecting Long-Term Disability (LTD) Benefits and Unemployment Benefits at the Same Time
There are a few situations where you can receive both long-term disability benefits and unemployment benefits.
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Individuals rarely receive long-term disability (LTD) and unemployment benefits at the same time because of the way these programs are typically designed. Unemployment benefits, generally administered by a state agency, are intended for individuals who are ready, willing, and able to work, but have lost a job through no fault of their own. Those collecting unemployment benefits are required to certify that they're capable of working either full-time or part-time, depending on the state, and that they're actively seeking employment. Long-term disability benefits, on the other hand, are provided by a private insurer and meant for individuals who aren't able to work due to illness or injury.
However, the eligibility requirements for LTD and unemployment benefits do occasionally overlap and in limited circumstances, as we'll see below, a person may collect both.
The Problem With Applying for Unemployment Benefits and LTD
Long-term disability insurance carriers and plan administrators will not hesitate to use an application for unemployment benefits against you. They may interpret your application as evidence that you think you can work. They may also find that you lack credibility because you're trying to maintain two supposedly contradictory positions at once. You're filing a claim for disability benefits based on your inability to work while at the same time affirming to the unemployment agency that you're ready and available to work.
Your state's unemployment agency may make similar inferences if it discovers you've filed a claim for LTD benefits: namely that you're not "ready, willing, and able" to work and therefore don't qualify for benefits.
Exception for Those With "Own Occupation" Policies
If your LTD policy defines the word "disability" broadly, you may be eligible for unemployment benefits if you were let go from your job. Review your policy's Summary Plan Description to learn whether you have an "own occupation" or an "any occupation" policy, or a hybrid of the two.
"Own occupation" LTD policies define disability broadly, as the inability to perform the material duties of your own occupation due to illness or injury. Thus, a firefighter who becomes unable to meet the demands of that job may be eligible for LTD benefits even though she could theoretically work in a less strenuous position.
On the other hand, under an "any occupation" policy, you'll be found disabled only if you're unable to perform the duties of any occupation in the economy for which you are reasonably fitted based on your education, training, and experience. Many disability policies, especially employer-provided group plans, shift the definition of disability from "own occupation" to "any occupation" after a period of time, usually 24 months.
Those who receive LTD benefits under an "own occupation" policy (or during the first 24 months of a hybrid policy) might well be able to show that they're "ready, willing, and able" to perform some type of work, even though they can no longer work at their previous job. In this case, they could collect LTD benefits and unemployment benefits at the same time.
Still, your state unemployment agency may deny you unemployment benefits if it determines that you've stopped working "voluntarily and without good cause," a standard that varies from one state to the next. Keep in mind that your state's unemployment agency may contact your employer to ask about the nature of your work separation.
Exception for Those Receiving Partial Disability Benefits
If your LTD policy provides for partial disability benefits, your chances for receiving both partial LTD benefits and unemployment benefits might be higher. Your state unemployment agency is less likely to use your receipt of partial LTD benefits against you, because it is highly possible that you could be "partially disabled" (that is, unable to substantially maintain your previous earnings from full-time work) but still be able and available to work somewhere.
The LTD Offset for Unemployment Benefits
Most long-term disability policies contain LTD offsets for "other income benefits" such as Social Security disability payments, workers' compensation, third-party settlements, and, yes, unemployment benefits. In those cases where an individual receives both LTD and unemployment benefits, LTD insurers are frequently able to deduct the monthly unemployment amount from their monthly LTD payments. Thus, if an individual receiving $1,400 per month in LTD benefits is approved for $1,000 each month in unemployment benefits, the LTD insurer would pay a reduced benefit of $400 as long as the individual is receiving $1,000 per month in unemployment benefits.
Offsets for unemployment benefits and other forms of income are common to both individual and group LTD policies, although individual policies are occasionally written to exclude certain offsets in exchange for higher monthly premiums.
If you're worried that filing for unemployment benefits may cost you your long-term disability benefits, arrange a consultation with a long-term disability lawyer before you file for unemployment.