Long-Term Disability Insurance

What is long term disability insurance?

Long term disability (LTD) insurance, also known as disability income insurance, provides wage replacement to individuals who become disabled and unable to work. LTD insurance may be distinguished from short term disability insurance, which provides similar coverage for the first six months of a disability. Typically, LTD insurance becomes effective when short term disability insurance expires.

Why should I obtain long term disability insurance?

A serious illness or injury may occur at any time and may result in severe financial consequences. Often, a disabled individual is unable to live comfortably on a spouse's income or on federal disability benefits. By paying insured individuals a percentage of their lost wages (typically 50 - 70%), LTD coverage allows such individuals to continue to support themselves and their loved ones.

Who provides long term disability coverage?

LTD insurance is provided by independent insurance companies and may be purchased by an employer for its employees, or by an individual. LTD coverage must be distinguished from benefits provided by the government, such as Social Security Disability Insurance and Medicaid. An individual may often receive LTD payments without sacrificing eligibility for governmental benefit programs.

Are all long term disability insurance policies alike?

No. Just like any insurance policy, LTD insurance policies offer a number of different features. The individual terms of the policy will dictate the cost of monthly premiums, when and how the policy becomes effective, how much coverage the policy will provide, and whether a waiting period will be imposed before benefits are distributed. Policies may also vary in how they define "disability." While some policies become effective as soon as an insured is unable to perform their own job, other policies become effective only when the insured becomes unable to perform any job. Additionally, some policies provide coverage only when an individual is totally disabled, while other policies allow the insured to retain benefits even if he or she is able to work on a part-time basis.

How do I decide which policy is right for me?

Before choosing a policy, an individual should consider the type of coverage offered by the policy, the length of the policy, the reputation of the insurance provider and the cost of monthly premiums.

How much does long term disability insurance cost?

Monthly premiums for long term disability insurance vary according to a number of different factors. In determining the cost of a policy, insurance companies may consider personal information about the insured, including the insured's age, medical history and the type of jobs that he or she is qualified to perform. Policy pricing will also be based on the features of the policy, including the total amount of coverage and the length of the policy.

How long does long term disability insurance last?

An individual policy remains in place as long as the premium is paid. Thus, a policy provided by an employer may be cancelled when the employment relationship ends. Individual policies dictate the length of time that insurance payments will continue. While some policies will provide payments for only five to ten years after the date of disability, other policies may continue making payments until the insured reaches retirement age - typically age 65.