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

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) insurance and long-term disability (LTD) insurance pay a portion of your working wages while you're on medical leave.

Short-term disability usually covers several weeks to several months of medical leave. When you have an injury or illness that keeps you off the job 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. Read on to 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?

Whether you can collect unemployment benefits while you're collecting long-term disability benefits depends on your LTD policy—and possibly how long you've been collecting LTD benefits.

Types of LTD Policies

First, you need to understand how your long-term disability policy considers the question of your ability to work (and your eligibility for benefits). Your LTD policy could consider you disabled if:

• you're unable to perform "your regular occupation" or "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 regular 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," an "any occupation" policy, or a policy that switches from "own occupation" to "any occupation" after two years, request a copy of your policy or its summary plan description page. Whether or not you can collect unemployment will depend on the type of LTD policy you have.

Collecting Unemployment Under Each Type of Policy

Next, let's look at whether you can collect unemployment when receiving benefits under each type of LTD policy.

Own occupation policies: Let's say you're a mover, but you've injured your back and now can't lift more than 10 lbs. Clearly, you couldn't continue to do your regular job. But what if you could work a desk job? You would still be disabled under an "own occupation" policy.

Since you'd be ready, willing, and able to do some sort of work, you can apply for unemployment benefits even though you're collecting LTD benefits under an "own occupation" policy.

Any occupation policies: Given the scenario above, if your LTD policy says you're disabled only if you're unable to perform the duties of "any occupation," then you can't work, or seek work of another type. That 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 occupations" standard add that, for a type of work 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 it, you'd meet the "unable to work in any occupation" test.

Policies that switch standards: 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.

Can I Collect Unemployment Benefits If I'm Terminated While on Disability?

Yes, you can be fired while 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.

So if you're getting benefits under an "any occupation" policy (or "any occupation" policy phase), applying for unemployment could cause your long-term disability benefits to end. Under these policies, if you can do any kind of work, you're no longer eligible for long-term disability benefits. If you can't work because of your disability, you shouldn't apply for unemployment. Sending the message to the insurance company that you can work, even though you can't, could hurt your LTD claim.

But if you're collecting LTD benefits under an "own occupation" policy, it might be okay to apply for unemployment—provided your injury or illness prevents you from doing your regular work. You can still pursue other kinds of work.

What if you lose your job while you're receiving short-term disability benefits rather than long-term disability benefits? You're more likely to be okay applying for unemployment while getting STD benefits because you're more likely to be recovered from your injury or illness (and would lose your STD benefits soon anyway).

Learn more about getting fired while you're on disability leave.

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?

Collecting unemployment and LTD benefits at the same time could cause your disability payments to be reduced. Many insurance policies call for LTD payments to be "offset" by the amount of other benefit income you receive. An offset can be triggered by any of the following:

• Social Security disability benefits
• workers' compensation benefits
• third-party settlements, or
• unemployment benefits.

Your long-term disability would likely be offset by your unemployment benefits—meaning the insurance company can deduct the amount of your unemployment from the LTD benefits it pays you.

For example, let's 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.