Can I Collect Unemployment Benefits While on Long-Term Disability?

Private disability insurance provides a safety net designed to help you with living expenses when you can’t work due to an injury or illness. Both short-term disability (STD) and long-term disability (LTD) pay a portion of your working wages while you’re on medical leave. Short-term disability usually covers several weeks to several months of leave. When your medical impairment keeps you working for many months or even several years, LTD benefits kick in.

But what if you lose your job while you’re on leave? Can you even get unemployment benefits while you’re collecting long-term disability? The answer isn’t a simple yes or no. Before you apply for unemployment benefits, you should learn when you might be able to get unemployment and LTD benefits at the same time and when applying for unemployment could hurt your LTD claim.

Can I Collect Unemployment While on Long-Term Disability?

The answer to this question will depend on whether your LTD disability policy defines “disability” in a way that conflicts with the purpose of state unemployment programs. When you apply for unemployment benefits, you’re telling the government that you’re ready, willing, and able to work at some kind of job, you just haven’t found one yet.

This can be at odds with LTD disability policies, which can sometimes consider you disabled if you can’t work at your usual job and at other times will consider you disabled if you can’t work at any kind of job. Whether or not you’re able to collect unemployment benefits while you’re receiving long-term disability therefore depends on the specifics of your LTD policy (and possibly how long you've been collecting LTD benefits).

Types of LTD Policies

You’ll first need to understand how your long-term disability insurer defines “disability.” Your LTD policy could consider you disabled if:

• you’re unable to perform your “own occupation" due to injury or illness, or
• you’re unable to perform the duties of "any occupation," or
• you can’t perform your own occupation for the first two years of benefits, and after that, only if you can’t perform any occupation.

To figure out whether you have an own occupation policy, an any occupation policy, or a policy that switches from own occupation to any occupation after two years (a common clause in many LTD policies), request a copy of your policy or its summary plan description page.

Collecting Unemployment Under an Own Occupation LTD Policy

Own occupation policies pay benefits to people who have a medical condition that keeps them from performing the duties of their usual job. For example, say you’re a mover, but you’ve injured your back and now can’t lift more than 10 pounds. Clearly, you couldn’t continue to do your regular job, but even if you could work a desk job, you’d still be disabled under an own occupation policy.

Since you’d be ready, willing, and able to do some sort of work—you’re just unable to perform your usual job—you can apply for unemployment benefits even though you're collecting LTD benefits under an own occupation policy.

Collecting Unemployment Under an Any Occupation LTD Policy

If your LTD policy says you’re disabled only if you’re unable to perform the duties of any occupation, that means that you’re not allowed to work a different job or seek work of another type without risking your benefits. That also means you can’t collect unemployment benefits and keep your LTD benefits, because collecting unemployment requires you to actively look for a job.

Most policies that use the any occupation standard do add a caveat that in order for another type of job to count as something you could do, you must have the appropriate job training, education, or experience for that work. For instance, if the only jobs you can now do require a college education and you don't have a degree, you’d be considered unable to work in any occupation.

Collecting Unemployment Under a Policy That Switches from Own to Any Occupation

Many employer-provided (ERISA) long-term disability policies switch standards after two years. They start off with an own occupation definition of disability and then switch to any occupation after you’ve been collecting LTD benefits for two years.

If you have one of these policies, you might be able to collect unemployment benefits during the first two years you’re getting LTD. But if you get unemployment benefits after the first two years, the insurance company would no longer consider you disabled and could stop paying your long-term disability benefit.

If I Get Fired From My Job While on Long-Term Disability, Can I File for Unemployment?

It’s not unheard of for people to get fired while they’re on long-term disability benefits. Although the Family and Medical Leave Act (FMLA) and some state laws might protect your job while you take time off to recover from injury or illness, not everyone is covered, and the job protection doesn’t last forever. If you’re disabled, you might have some job protection under the Americans with Disabilities Act (ADA) if you can do the essential functions of the job. But there are still times when an employee can be terminated while on medical leave.

If you lose your job while you’re collecting long-term disability benefits, you might be tempted to apply for unemployment benefits. But remember, when you apply for unemployment, you’re saying you’re ready and able to do at least some kind of work. And when you’re collecting LTD benefits, that means the insurer either thinks you can’t do your regular job (under an own occupation policy) or any kind or work whatsoever (under an any occupation policy).

Therefore, if you apply for unemployment and you’re receiving LTD benefits under any occupation policy, you’re sending mixed signals to both the unemployment office (and your LTD insurer) by saying that you both can and can’t work at any job at the same time. That’s likely to get the unemployment agency to deny your claim and possibly get the LTD insurer to end your benefits as well—a highly undesirable outcome.

However, if you’re collecting LTD benefits under an own occupation policy, it might be okay to apply for unemployment as long as your medical condition prevents you from doing your regular work. In this case, you’re not saying that you can’t do any job, just your usual profession. It’s okay to pursue other kinds of work without going against the unemployment rules or the LTD policy provisions. And if you lose your job while you’re receiving short-term rather than LTD benefits, you’re more likely to be okay applying for unemployment because you’re more likely to recover soon from your injury or illness (at which point your STD benefits would cease anyway).

Can I Continue to Collect Long-Term Disability Benefits If I'm Fired?

Long-term disability insurance is designed to protect your income when you can’t work due to injury or illness. It does nothing to protect your job. So, not surprisingly, most LTD recipients are eventually fired.

The good news is that if you’re already getting long-term disability payments, being fired generally won’t affect your continued eligibility for benefits, even if you get your LTD insurance through your employer. With employer-sponsored insurance, the question of eligibility isn’t about whether you still work for that employer. Instead, your eligibility is based on whether you were eligible for LTD benefits on the day you became disabled.

Will Collecting Unemployment Affect How Much Long-Term Disability I Get?

Many insurance policies call for LTD payments to be “offset” by the amount of other benefits you receive, including unemployment (if you’re approved). An offset means that any income you get from sources such as unemployment benefits, Social Security disability, workers’ compensation, or third-party settlements will be deducted from your LTD payments.

For example, say you’re getting $2,300 in LTD benefits each month, and you’re approved for $1,100 in monthly unemployment benefits. If your LTD insurer offsets your monthly disability payment by the amount of your unemployment benefits, you’ll get only $1,200 per month in long-term disability while you’re receiving $1,100 per month in unemployment.

Most individual and group LTD policies include offsets for unemployment and other benefit income. Some individual policies might not, but they usually come with higher premiums. (Learn more about what can affect how much your LTD insurance pays.)

Do I Need to Get a Lawyer?

It’s unlikely that you’ll need a lawyer to apply for unemployment or file a claim with your long-term disability insurance provider. But if your LTD claim has been denied and you need to appeal, you think you were wrongfully terminated because of a disability, or some other complex issue arises that involves more than just filling out paperwork, it can be a smart move to contact an attorney who has experience handling long-term disability claims.