Pre-Disability Earnings - Herbert M. Hill

Learn how pre-disability earnings affect your Long Term Disability benefits. Understand the calculation, what counts as income, and how to maximize your LTD claim.

When you file a Long Term Disability (LTD) claim, one of the first questions your insurance company will ask is: What were your pre-disability earnings?

This figure plays a significant role in determining the amount of benefits you will receive, and misunderstandings about it are one of the most common reasons claimants are underpaid or denied altogether.

Below, we will break down what pre-disability earnings mean, how they are calculated, and how they can affect your LTD benefits.

What Are Pre-Disability Earnings?

Pre-disability earnings refer to the income you were earning immediately before you became disabled and unable to work. This amount serves as the foundation for calculating your monthly LTD benefit — typically a percentage of your regular pay (for example, 60% of your pre-disability earnings).

However, how your policy defines pre-disability earnings can vary. Some policies include bonuses, overtime, and commissions, while others consider only your base salary. Understanding your insurer’s exact definition is critical, as it directly affects the amount you will receive each month.

How Pre-Disability Earnings Affect Long Term Disability Benefits

Your LTD benefits are usually calculated as a percentage of your pre-disability earnings, so the higher that figure is — within policy limits — the higher your monthly benefit will be.

But things can get complicated quickly. For example:

Variable income: If your job involves commissions or overtime, your insurer may average your income over a set period (such as the previous 12 months).
Bonuses and incentives: Some policies exclude these entirely, even if they were a consistent part of your pay.
Employer changes: If your pay structure changed before your disability began, your insurer may use an outdated rate unless you provide proper documentation to support the current rate.

Because these nuances can significantly affect the outcome of your claim, it is essential to verify how your insurer calculates pre-disability earnings early in the process.

How Insurers Calculate Pre-Disability Earnings for LTD Claims

Most insurance companies follow the calculation method outlined in your Summary Plan Description (SPD) or policy booklet. The calculation typically includes:

Base salary – Your fixed, regular pay before taxes.
Average variable income – Commissions, bonuses, or overtime averaged over a specific period.
Employment type – Whether you are hourly, salaried, or self-employed may impact the formula.
Timing of the disability – The “look-back” period may vary; some policies use the last full month before the disability, while others use a 12-month average.

Even a small difference in how this calculation is applied can change your benefit amount by hundreds — or even thousands — of dollars per month.

Common Issues with Pre-Disability Earnings Calculations

It is not uncommon for errors or oversights to occur when insurers calculate pre-disability earnings. Common problems include:

Misclassifying commissions or bonuses as “non-eligible”
Using outdated salary information
Averaging income incorrectly (especially for sales or contract employees)
Applying the wrong definition of “earnings” stated in the policy

If your benefit amount seems lower than expected, it is worth reviewing your policy’s definitions and verifying that your insurer used the correct figures.

What to Do if You Disagree with Your Benefit Calculation

If you believe your insurer miscalculated your pre-disability earnings, you have the right to appeal the decision. This process often involves submitting:

Updated payroll or W-2 records
Tax returns (for self-employed individuals)
Documentation of bonuses or commissions
A letter clarifying your pay structure from your employer

Because these cases often hinge on technical definitions and precise documentation, working with a Long Term Disability attorney can make a significant difference. An attorney can help ensure your income is accurately represented and your benefits are calculated fairly.

Get Help Understanding Your Long Term Disability Policy

Calculating pre-disability earnings should not be confusing — but unfortunately, many claimants fail to realize their benefits were undercalculated until it is too late.

If you have questions about how your insurer determined your earnings or believe your LTD benefits were miscalculated, our experienced Long Term Disability attorneys at Herbert M. Hill, P.A. can help.

We will review your policy, assess your income documentation, and ensure your claim is handled fairly from start to finish.