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Does It Matter Who Pays My Disability Insurance Premiums?



Attorney Cesar GavidiaAuthor: Attorney Cesar Gavidia

The manner in which an insured chooses to pay their disability insurance premiums could have a major impact on their disability claim. The way an insured chooses to pay their premiums — either personally, through employer contributions or a salary allotment plan — not only impacts the taxability of those benefits when they file their claim, but also the law which governs their claim should they one day find that they need to challenge the disability insurance company’s denial of benefits in court. If an employer contributes to the plan, or if the insured chooses to participate in a salary allotment plan where the employer deducts the premiums from their pay, disability insurance companies will attempt to argue that these claims and policies are governed by ERISA, which would preempt any state law causes of action that they could bring, as well as damages and overall financial exposure for the disability insurance company. This is information that the disability insurance company never divulges when the insured first purchases their policy, and often information that the insurance sales agent is often completely unaware of. Also, if premiums are paid with post-tax dollars, then the monthly benefit should not be taxable to the claimant.

There are 4 opinions so far. Add your comment below.

NEMESIO S.:

Hi MY NAME IS NEMESIO, I RECEIVE A LUMP SUM OF MONEY OVER 40.000 THOUSAND BACK PAY FROM SOCIAL SECURITY LAST OCT. I HAVE BEEN RECEIVING PAYMENTS FROM CIGNA INS. WHEN I GOT THE SSD LUM SUM THEY CUT ME OFF. I HAD TO PAY BACK TO THEM MOST OF MY PAY BACK. AND NOW I’M STUCK WITH OVER 6000.00 DOLARS IN TAXES. I PAID CIGNA PREMIUS FOR ABOUT 38 YEARS. IS THERE ANYTHING YOU CAN DO?

Attorney Stephen Jessup:

Nemesio, if your question relates to your tax liabilities you will need to speak to an accountant or other tax professional. Did you file an appeal of the denial?

Dee B.:

I have had my LTD policy since October of 2013. I completely paid the premiums from post-tax dollars until August of 2014 and at that time the company began paying totally for those premiums. I became disabled in Jan of 2016 after an MVA and am wondering how to consider the disability payments when filing my 2016 taxes.

Attorney Stephen Jessup:

Dee, as we are not tax professionals we cannot provide any tax advice. As such you will need to consult with a qualified tax professional to determine your liabilities.

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