Long-Term Disability Insurance

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Long Term Disability (LTD) Insurance (or disability income insurance, as it is sometimes called) is a type of insurance that provides partial (50% – 70%) income replacement when an individual cannot work due to illness or injury.

It can be provided by employers, purchased as an individual policy, or through membership in certain organizations. LTD policies are designed to provide financial support while individuals are unable to participate in the workforce – usually for a period of 2 years up to age 65 (longer in some policies), depending on the level of coverage chosen.


Key Article Takeaways

It is important for individuals to understand how long-term disability insurance works and the associated benefits so they can make informed decisions about their future financial plans.
The first step in understanding how long-term disability insurance works is to understand the definition of a disability, as stated by the insurance companies. There are basically two definitions (with a few variations of each) – Own-Occupation and Any-Occupation


Own Occupation vs Any Occupation


Own Occupation (Own-Occ)

The own occupation definition states that if you cannot perform the usual and customary duties of your occupation, you will be considered totally disabled (even if you could work in another occupation). A true own-occ definition will also include specialty-specific language for physicians.


Any-Occupation (Any-Occ)

An Any-Occ definition of disability states that the policy will pay benefits if you are unable to work in a job suitable for you based on your education, experience, and age. If you are capable of still working, even if it is at a lower-paying job, an any-occupation policy would not pay benefits.


How Much Monthly Benefit Will I Receive?

The amount of money a disability insurance policy pays out will depend on the individual plan. Generally, policies are designed to replace between 50% and 70% of an insured person’s income if they become disabled due to injury or illness.

The exact percentage depends on factors such as age, occupation, salary, and other details related to their specific situation. It is also important to note that most plans do not cover all types of disabilities; some may only provide coverage for certain medical conditions while others have more expansive definitions.


How Long Is the Benefit Period?

When selecting a long-term disability policy, it is important to consider the length of time benefits will be paid out. Coverage extends for varying lengths of time depending on the policy. Benefit periods are typically 2, 5, or 7 years or up to age 65 (67 for some policies).

There are a few policies that will pay benefits for your entire lifetime. In my experience, most of our clients select the “to age 65 (or 67) benefit period. As such, understanding both the maximum limit of any given policy and what provisions exist should an individual require longer-term protection is essential prior to making a commitment. 


Benefit Waiting Period (Elimination Period)

When it comes to long-term disability insurance, an elimination period is the length of time between when a claim is made and when benefits are paid out. This can be thought of as similar to a deductible on car insurance—the higher the number, the lower the premium.

To put this into context, consider that someone with a 60-day elimination period would need to wait two months before they receive any payment from their provider whereas a person with a one-year elimination period could expect benefits to be paid in just over a year.

The amount of time chosen should always reflect individual needs; for example, those who have enough savings or other forms of income to cover expenses during shorter waiting periods may benefit significantly by opting for longer ones (and vice versa). The longer the benefit period, the less premium you will pay.


Types of Coverage

The type of Long-Term Disability coverage that an individual is eligible for will vary depending on the particular policy they have chosen. The two most common forms are employer-sponsored plans are Individual (private) and Group coverage (Employer-sponsored LTD plans are typically provided through a group plan, meaning all employees participate in the same program with shared costs and benefits. Individual disability insurance can be purchased by an individual from any number of insurers or brokers (including the disability insurance experts at LifeInsure.com) who specialize in this field.

Employer-sponsored plans may offer more comprehensive protections than those found in private policies, but there could also be restrictions in terms of how long a claim may last and what types of disabilities are covered. Additionally, premium rates tend to be lower (or at no cost to the employee) when participating in an employer’s plan since the cost is spread across multiple members as opposed to being carried by only one person in a private policy setting.

On the other hand, purchasing an individual policy allows individuals greater flexibility when it comes to selecting their own limits and benefit duration periods – making them ideal choices for self-employed workers or those without access to an employer-provided option.

No matter which form of coverage is selected, understanding its provisions before signing up for protection is key to ensuring financial security during times of disability-caused illness or injury. With this knowledge now established we look further into obtaining disability income through means such as individual disability insurance policies.


Indivual Disability Insurance

Individual disability insurance policies offer an additional layer of protection for those who are unable to work due to illness or injury. There are several key components that need to be considered when selecting this type of coverage, including:

The benefit period – the length of time during which benefits will continue if you become disabled.The elimination period – any waiting periods before benefits begin.The definition of “disability” used by the policy and how it is applied in making payments.Additional riders or options available such as cost-of-living adjustments, residual benefits, and non-cancelable provisions.

It is important to understand these factors when comparing different individual disability insurance plans so that an informed decision can be made on which one best suits your needs. Furthermore, certain insurers may provide more appealing rates than others depending on age and health history so shopping around is encouraged. In weighing up all these considerations an appropriate level of coverage can be obtained while avoiding overpaying for unnecessary features. With this understanding now established we move our focus onto group disability insurance plans.


Group Disability Insurance

Group disability insurance plans offer a different approach to protecting against the financial risks of being unable to work due to illness or injury. As it is typically provided as part of employee benefits packages, this can be an attractive option for those looking to protect their income as it tends to come with lower premiums compared to individual policies. It should be noted however that group coverage will usually not extend beyond the duration of employment so care must be taken if seeking long-term protection.

When assessing such packages several key criteria should be considered including

Whether benefits are taxableIf there are any waiting periods before payment beginsHow policy definitions and provisions may differ from individual coveragesAny options for portability in case of job changes. With these factors established along with contribution levels and other associated costs, one can then make a more informed decision on whether group disability insurance is suitable for them.

TIP: A good way to ensure your needs are met when choosing between individual and group disability insurance is to think about how much risk you want covered over the longer term, what type of plan fits into your budget, and which offers greater flexibility depending on future circumstances.


Short-Term Disability Insurance

Short-Term Disability benefits are often offered as part of a group disability policy. Short-term disability benefits are typically paid for 2-3 months of a disability. Individual Short-Term disability insurance policies have not been very popular, mostly due to the cost. At the date of this writing, I believe only one company provides this coverage.


Additional Long-Term Disability Benefits

For many individuals, disability insurance is a valuable tool that provides protection if they become unable to work due to an illness or injury. However, the traditional coverage may not be enough for some people’s needs; this is where riders come in. A rider is an additional policy feature that can expand on what is already offered – providing extra financial security and peace of mind.

In terms of disability insurance, there are several riders available that serve different purposes. For example, one type might offer a lump sum payment should someone become disabled while another could provide ongoing benefits until retirement age. Some plans also have optional riders to cover specific medical conditions such as cancer or heart disease which can help protect against unexpected expenses related to their care.

These types of features can provide greater flexibility when it comes to tailoring disability policies according to individual circumstances – allowing people to get the most out of their coverage while ensuring they are protected during difficult times. As such, considering whether these riders make sense for your particular situation is essential before committing to any plan:

Partial (Residual) Disabilities

In addition to the differences between own occupation and any occupation coverage, another important consideration when selecting a long-term disability insurance plan is that of residual disability. A residual disability policy pays out benefits if an individual can still work part-time or can perform some, but not all of their duties and has had a loss of income due to a disability. The Residual benefit will pay a percentage of the benefit based on the percentage of lost income (e.g. if the monthly benefit is $5,000 and the insured person has a 30% loss of income, the policy will pay out 30% of $5,000= $1,500).

Furthermore, it is important to remember that policies featuring residual disabilities will often have specific definitions attached—outlining what constitutes meaningful losses in income—so buyers must make sure they understand these criteria prior signing up for a plan.

COLA (Cost of Living Adjustments)

With this benefit, the insured will receive annual adjustments to the benefit while disabled, in order to keep up with inflation. There are typically 3% or 6% of the CPI. They will be compounded in the best policies.

Benefit Increase Option

This option allows you to increase the monthly basis (typically annually) if you have had an increase in income, without having to go through medical underwriting again. Proof of income will be required.

There are other benefits available, but we consider those listed above to be the most important.


Qualifying for Benefits

In order to qualify for disability benefits under an LTD policy, claimants must not be able to work, as per the definition of disability (own-occ or any-occ) on their policy. Furthermore, medical documents demonstrating the nature and severity of the condition that has caused them to become disabled must also be presented in order for benefits to be approved.

Additionally, many plans require that recipients remain under the care of qualified health professionals during the duration of their claim in order for benefits payments to continue uninterruptedly. With knowledge about how disability insurance works and its various options now firmly established, it’s time to examine another important form of protection: social security disability insurance (SSDI).


What About Social Security Disability Insurance?

Social Security Disability Insurance is a federal program that provides income to individuals who are unable to work due to physical or mental disabilities. This form of protection can be an invaluable source of financial stability during times of difficulty and often helps those affected retain their independence.

To qualify for SSDI, applicants must meet certain criteria – including having enough Social Security credits from paying into the system through payroll taxes over the years and being approved by the Social Security Administration after submitting appropriate documentation.

Benefits will last up until retirement age unless recipients are able to find employment again or their condition improves significantly. Additionally, there may also be other forms of assistance available based on individual circumstances such as Supplemental Security Income (SSI) which is meant for people with limited resources. It’s important that individuals interested in applying for either option consider all relevant information before making any decisions about pursuing this type of coverage.

Overall, understanding how social security disability insurance works and what it offers can help provide peace of mind when considering long-term disability plans – allowing those affected to make informed choices and feel more secure knowing they have a plan in place should something unexpected occur. With this knowledge now established, attention turns toward the tax implications associated with these types of policies.


Are There Tax Implications?

The burden of disability can be overwhelming, and the financial considerations associated with it may appear daunting. Yet many overlook a key element when making such decisions: taxes. As part of any long-term planning strategy for disability insurance, one must carefully consider how their policy will affect them during tax time.

When looking into federal income tax implications related to this form of coverage, there are two aspects that need to be considered; firstly, whether or not premiums paid towards policies are deductible, and secondly, if benefits received from said plans are taxable.

With regards to deductions most employers have the option to provide their employees with some sort of pre-tax deduction on premiums they pay out – meaning those affected would then only owe taxes on whatever portion remains after deducting these payments. On the other hand, though, it’s important to note that benefits themselves typically do qualify as income since these funds were previously deducted from payrolls in advance.

For disability insurance policies, the general rule is – if you pay the premium, the benefits you receive are not taxable. Conversely, if someone else pays the premium (e.g. your employer), the benefits you receive will be taxable. As we are not tax advisors, it is always best to double-check with your tax professional.

It is therefore essential for individuals considering taking out a long-term disability plan to understand exactly how its components interact with taxation laws before making any commitments – ensuring that all relevant factors have been considered beforehand in order to safeguard against future issues down the line. Moreover, once an understanding has been established regarding how taxes play a role in this type of protection plans can begin exploring what kind of financial planning strategies might best suit their needs moving forward.


Financial Planning Strategies

When it comes to constructing a financial plan for long-term disability, there are several approaches that can be taken. Firstly, individuals should consider the importance of setting aside funds in an emergency savings account specifically earmarked for illness or injury-related expenses; this way if and when such events occur they have access to capital without having to resort to taking out loans or using credit cards.

Additionally, those looking into these procedures may find benefit in examining income protection insurance policies that provide coverage against lost wages due to health issues – often allowing customers discounts based on their age and other factors.

In addition to these steps, many also turn towards investments as part of their overall strategy with regard to protecting themselves from future disabilities. This can include things like stocks, bonds, real estate portfolios, or annuities depending on each individual’s risk tolerance and preferences – all of which offer varying levels of returns over time while still allowing them some degree of control over how much money is invested at any given point.

Finally, it is important to note that tax implications must always be kept in mind during this process since certain deductions or credits may apply depending on one’s specific situation; consulting with a qualified accountant would therefore prove invaluable both prior to entering into such plans and afterward as well. With all these considerations taken care of though, those affected by disability will have a better chance at attaining financial security even in difficult times ahead.


What is the Disability Insurance Application Process?

If you have ever applied for life insurance, you will find the application process for a disability insurance policy to be quite similar. Your agent will take your application (in person or on the phone) and, in many cases, a medical exam will be required (there are several no-exam policies available, but with lower benefits than you might need).

The biggest difference between a life insurance application and a disability insurance application is that income documentation is required for a disability insurance application. As the insurance company will be paying a benefit, based on a percentage of your income, if you become disabled, they need to know what that income is.


Who Is Eligible for Long-Term Disability Coverage?

Long-term disability coverage is an insurance policy that provides income to individuals who are unable to work due to illness or injury. Eligibility criteria for this type of benefit vary depending on the provider, but some common requirements include a minimum length of employment at a company and/or meeting certain medical qualifications. Additionally, many policies also require the individual to have been employed prior to their inability to work in order for them to be eligible for long-term disability benefits.

In terms of eligibility criteria, most providers will look at both the medical history and financial information related to the applicant’s ability and need for long-term disability coverage. The medical evaluation typically looks at whether there is evidence of functional impairment that would prevent someone from being able to perform substantial gainful activity (SGA) over an extended period of time. Financial considerations may involve evaluating the amount of money needed by the applicant in order to maintain their lifestyle while disabled.

Once approved, most long-term disability plans provide benefits up until retirement age, although they may not cover all expenses associated with living on a limited budget. It is important for those considering this form of protection to understand what limitations apply before making any commitments as well as how much it costs each month in premiums. In addition, one should verify if there are any additional exclusions or limitations within the plan that could limit potential payouts when filing for claims.


How Do I File a Claim for Long-Term Disability?

Filing a claim for long-term disability can be a complex process, as there are many steps to take and several deadlines that must be adhered to. However, by taking the time to understand the eligibility requirements and being aware of potential pitfalls, claimants have an increased chance of successfully filing their claims.

When it comes to determining eligibility for long-term disability coverage, insurance companies often look at factors such as the type of job one has held in the past five years or how much income is earned each month. Some policies also require individuals to meet certain medical standards before they are eligible for benefits. Additionally, some employers may provide supplemental coverage which could further increase an individual’s chances of receiving financial assistance if needed.

In order to file a claim for long-term disability, claimants should first contact their insurer directly or seek out legal advice from an experienced attorney who specializes in this area. When contacting insurers, individuals should keep records of all conversations and document any information received regarding their policy terms and conditions.

Claimants should also ensure they adhere to all applicable deadlines in order to avoid delays in processing their applications. Furthermore, collecting supporting evidence such as medical reports or other forms of documentation will help strengthen applicants’ cases when submitting their claims.


What Medical Conditions Are Typically Covered Under Long-Term Disability Insurance?

Long-term disability insurance, or LTD for short, is designed to provide individuals with financial security if they are unable to work because of a medical condition. One important question that must be asked when considering an LTD policy is what medical conditions it covers.

Most long-term disability policies will cover both physical and mental disabilities, including illnesses and injuries sustained while on the job.
Physical disabilities covered by LTD policies can include cancer, stroke, paralysis, joint disorders such as arthritis and osteoarthritis, multiple sclerosis (MS), chronic fatigue syndrome (CFS), heart disease, diabetes mellitus type 2 (DM2), and other significant impairments.

Mental health issues like depression, anxiety disorder, and post-traumatic stress disorder (PTSD) may also be included in some policies. In addition to these known medical conditions, many policies also have provisions that allow coverage for undiagnosed conditions or pre-existing conditions as well.

It is essential to note that each individual’s situation is unique; therefore, every policy should be carefully reviewed before making any decisions about whether to purchase an LTD policy. When reviewing a policy, it is crucial to consider not only the types of illnesses and injuries it covers but also any exclusions that might apply.

Additionally, one should look at the length of time benefits will be paid out after becoming disabled due to a qualifying medical condition. This will help determine how much money they would receive in the event of an illness or injury that prevents them from returning to work.


Are There Any Pre-Existing Conditions That Will Not Be Covered by Long-Term Disability Insurance?

Long-term disability insurance is designed to provide financial support for those who experience a long-term illness or injury that prevents them from working. While most medical conditions are typically covered under this type of insurance, there may be some pre-existing conditions that are not included in the coverage.

It is important to understand what types of medical issues will and will not be covered by your policy before signing up for a plan.
When it comes to preexisting conditions, each insurer has its own set of rules and regulations regarding coverage eligibility. Any condition that existed prior to applying for the policy will likely not be eligible for benefits if it causes an inability to work.

This includes mental health illnesses such as depression and anxiety and physical ailments like arthritis or back pain. Additionally, certain treatments or services related to these conditions may also not be covered by long-term disability policies.

In order to get a full understanding of which pre-existing conditions may or may not be excluded from coverage, it is important to read through the fine print when reviewing different plans offered by insurers. You should also consult with your doctor about any potential limitations on treatment options due to existing medical concerns or diagnoses so you can make an informed decision about the best long-term disability policy for your needs.


Are There Any Limitations on How Long Benefits Will Be Paid Out?

Long-term disability benefits are typically paid over an extended period of time, usually up to five years or more. However, there can be certain limitations that may affect the duration of those payments. This article will discuss three such limitations: benefit caps, income requirements, and health qualifications.

One important limitation is a benefit cap. Many long-term disability policies impose a maximum amount that can be received in monthly or yearly benefits. If a policyholder reaches this limit, they must find other sources of income until their disability ends or until the policy renews with higher limits.

Income requirements also play a role in how long someone receives long-term disability payments. The policy’s language may state that if a beneficiary earns too much money from another source during the period when they receive benefits, then their payments may be reduced or stopped altogether. Therefore, it is important to carefully read through any insurance plan’s terms and conditions before signing up to understand all relevant restrictions on income levels while receiving benefits.

Lastly, health qualifications come into play when determining eligibility for long-term disability coverage and deciding how long those benefits will last. Insurers typically require beneficiaries to undergo periodic medical evaluations before approving continued payment of claims; these exams help ensure that claimants continue to meet the criteria set out by the insurer’s policy regarding disabilities covered under their plans. If claimants no longer qualify due to changes in their condition since first applying for coverage, insurers can reduce or stop paying out benefits accordingly.

Overall, anyone considering taking out a long-term disability policy should research what kinds of restrictions are associated with it beforehand so as to properly prepare themselves for any potential delays in receiving payments due to factors such as benefit caps, income requirements and health qualifications imposed by insurers.



In conclusion, long-term disability coverage is an important form of insurance that can provide financial security in the event of a disabling medical condition. It is essential for potential policyholders to understand who is eligible for this type of coverage and how to file a claim should it become necessary.

Additionally, understanding what conditions are typically covered through long-term disability policies as well as any pre-existing conditions not covered by such plans is paramount when considering purchasing one.

Finally, those interested in obtaining long-term disability insurance must be aware of any limitations on how long benefits will be paid out so they may plan accordingly. Like laying down the foundation stones before building a house, having all the requisite knowledge about long-term disability insurance helps individuals make informed decisions and ensures peace of mind like a calm lake undisturbed by waves.

For more information or to get free no-obligation Long-Term Disability Insurance quotes, call the insurance professionals at LifeInsure.com at 866-868-0059 or contact us through our website.


Long-Term Disability Insurance

Get Answers to Your Disability Insurance Questions and Get Your Free Quote Today!

The post What is Long-Term Disability Insurance? appeared first on Lifeinsure.com.

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