Because of the current situation we find ourselves in with COVID many insureds are making the decision to either “retire” or “resign” from their jobs from the very beginning of medical impairment. Disability insurance companies are very, well, let’s say “sensitive”, to claims when insureds mention “retirement” or “resignation.”
Disability insurance is NOT retirement income and won’t get your disability claim paid if mentioned to claims handlers in the context, “I’m filing for disability and want to retire.” This kind of dialog gives the insurance company the idea that you probably aren’t “medically impaired”, but just want to retire and have a second source of income.
Most of my readers already know that “retirement income” is an offset from ERISA Plans, and although a few older IDI policies do mention benefits + retirement together, it doesn’t mean that insurers will dismiss the possible motivation and intent that retirement is replacing medical disability. IDI policies do NOT cover retirement as a general rule.
“Resignation” means “I quit” and not necessarily from medical impairment. It’s important for employees who need to leave work because of medical restrictions and limitations to say so and not officially submit, “My resignation.” I’ve spoken about this often enough on the blog.
The ERISA folks should also weigh very carefully whether accepting voluntary retirement while on disability is worth it or not. While discussing whether certain types of retirement income are offsets or not is a whole other article, nearly all insurers will offset retirement income and ask questions later.
Compounded offsets such as retirement, SSDI, and WC income nearly always reduce disability benefits to a stated minimum benefit from the Plan. Is it worth it? When you add in retirement income and taxes, the issue becomes much more complicated.
However, my point is that the words “retirement” or “I resigned” should never be mentioned as reasons for filing disability claims. Of course, claimants are required to report retirement income, but phone discussions should not include your personal motivations as to why you are filing a claim other than, “my physician has provided me with medical restrictions and limitations that preclude me from working at this time.”
Insurance companies depend on you to put both feet in your mouth, which is why DCS, Inc. has never recommended phone interviews with insurance representatives.
It is very important for claimants and insureds to remember that disability is about medical impairment in combination with the inability to work. Retirement is not a motivation to file a disability claim and won’t be successful if positioned that way with the insurance company.
