Alameda County
Bar Association

Do I Need Private Disability Insurance If I Have Group Disability Insurance Through My Employer? 
A short list of considerations to make an informed decision

Private individual long-term disability (LTD) insurance claims: subject to state law
California (and most states) allow a person wrongly denied individual LTD insurance benefits to bring a lawsuit for breach of contract and bad faith denial of insurance benefits. If this is the case, you can claim general damages outside the strict contract amount, including punitive damages. State law gives you a right to a jury trial. State law allows for “discovery” during the course of the lawsuit, meaning you get to have witnesses (including the insurance claim representative) and medical doctors testify. State court cases will generally favor the unbiased opinions of the treating doctors. California (and many states) do not allow a “discretionary clause” in LTD insurance contracts, meaning the insurance company does not have the sole discretion to determine whether you meet their definition of disabled from employment.

Group LTD insurance from your private employer: subject to ERISA and federal law
Your group LTD insurance will be subject to the federal ERISA law, so you may only bring a claim for denial of benefits in federal court, and federal law, not state law, will apply in most instances. You cannot have a jury. The judge will decide the case. There is no, or very limited, discovery, meaning you, your doctors and the insurance representatives do not testify.  There are no general damages (anything outside the strict contract benefits).  There are no punitive damages.  In many states the discretionary clause is allowed in group LTD policies, so the insurance company has the sole discretion to determine if you meet their definition of disabled from work, and the federal judge cannot change their decision if there is any reasonable basis for that decision.

Based on the above it is easy to deduce that LTD benefits are granted less often under employer provided, group policies than under privately purchased individual policies, since the court enforcement remedies are vastly different.  Moreover, with a privately purchased policy you may be able to select how many years of coverage are available for being disabled from your own occupation or profession, and what the monthly benefit dollar amount will be.  Group policies generally do not offer any choice on the length of coverage (typically two years) for not being able to do your own specific job or profession.  Don’t forget to look for “offsets” (deductions from your LTD monthly benefit amount) in any LTD policy.  With a group policy you want to understand how may offsets are applied to your maximum LTD benefit amount, since the offsets may bring the benefit to nearly zero.  With a privately purchased individual LTD insurance policy you can at least decide whether a particular policy is worth the cost based on listed offsets.

While the above is not meant to be an exhaustive list of the pros and cons of private vs. group LTD insurance, it may assist in determining whether the expense of a private LTD policy better meets your unique needs.

Randy Noah, a lawyer specializing in the representation of individuals denied long-term disability insurance benefits.  For more information please visit