What Is Long-Term Disability Insurance?

Long-term disability insurance is designed to help supplement income when you’re unable to work due to a disability. Long-term disability payments will typically last between 5-10 years, or until retirement, depending on your coverage.

Losing the ability to work is more common than many people think. It’s estimated that 1 in 4 of today’s 20-year-olds will become disabled before they retire. Many people end up facing financial hardship due to a disability. This is where long-term disability insurance can help. 

How Does Long-Term Disability Insurance Work?

To use long-term disability insurance most efficiently it is important to understand how it works.  First, how do you know when you are  considered “disabled?” The answer may vary based on your policy, but in nearly all cases you are considered “disabled” when your disability or illness prevents you from working. The exact wording may differ so make sure you check your specific policy. 

Second, which disabilities are  considered “long-term?” Again, this answer may vary depending on your specific policy, but here are some general guidelines. A long-term disability is typically life-altering, hindering your ability to work for a long time. Many types of illnesses can cause this sort of disruption in your life but some of the most common are cancer, mental health issues, serious injuries, and musculoskeletal diseases. 

It is important to know how to apply for benefits. With most plans, after your disability has prevented you from working, you will file a claim. The claim will need to include the date you stopped working, notes from your doctor, and any other relevant information. At this point, the insurance company will begin its evaluation. Once your claim is accepted, most plans have a required unemployed waiting period before benefits begin. For many long-term disability insurance plans, this is  90 days, but the exact time frame will be listed in your policy. After the waiting period is over, your benefits will begin! The length of time benefits last varies from policy to policy. With some policies, benefits will last  5-10 years, other policy’s benefits may last until age 65 or retirement.

Types of Long-Term Disability Insurance

There are two main benefit types for long-term disability insurance. Own-Occupation and Any-Occupation. 

Own-Occupation: Own-occupation is based on your ability to continue your occupation. If you’re unable to perform duties at your regular position, then you may be eligible for benefits. For example, if you are a surgeon and your disability prevents you from continuing to be a surgeon, then you would qualify for benefits even though you may still be able to perform duties of a different occupation. 

Any-Occupation: Any-occupation is based on your ability to work in general. Benefits become available when your disability prevents you from completing any duties at any job. For example, if you are a plumber and your disability prevents you from completing your duties as a plumber, but you’re able to work some other reasonable occupation, then you would not qualify for benefits. To receive benefits, you must prove you are incapable of completing the duties of any reasonable occupation. 

How Much Does Long-Term Disability Insurance Cost?

The exact cost of long-term disability insurance will vary based on the type of policy, your age, gender, occupation, and health. The younger you are when you purchase long-term disability insurance, the cheaper your premiums will be. Initially, women pay more for long-term disability insurance due to the higher amounts of claims relating to pregnancy. But rates for men grow faster over time than rates for women. By age 40, a man will typically be paying 50% more in premiums than a woman of the same age. Working a higher-risk occupation will increase your premium rate. Health also plays a role. When it comes to the rates for long-term disability insurance, the better your health, the lower your premium since the chance of you becoming ill or injured due to poor health will be lower.

After age, gender, occupation, and health are taken into consideration, the type of plan you choose will also be reflected in the price. Factors like benefit amount, how long benefits can be received, and the waiting period before receiving benefits all play a part in determining your premium. 

How Long-Term Disability Insurance Differs

Long-term disability insurance is not the only type of disability insurance available. Short-term disability insurance, group insurance, worker’s compensation,  and social security can also provide disability benefits. Here’s how each of these plans differs from long-term disability insurance 

Short-term vs. Long-term: The biggest difference between short-term and long-term disability insurance is the length of time they are designed to last. Long-term lasts for years, short-term, on the other hand, lasts on average between 3-6 months. It is designed to pay out the moment your disability prevents you from working, whereas long-term disability insurance will typically have a waiting period of 90 days or more. 

Group Disability vs. Long-Term Disability Insurance: A group disability plan shares many similarities with a long-term plan. A group disability plan is designed to cover a group of people (usually employees) and is maintained by the employer. Everyone within the group is covered regardless of age or health.

Worker’s Compensation vs. Long-Term Disability Insurance: Worker’s Compensation is very different from typical disability insurance. While long-term disability insurance covers all disabilities, whether work-related or not, Worker’s Compensation only covers injuries that occur while you are on the job.

Social Security vs. Long-Term Disability Insurance: Social security disability plans are funded by the government through taxes. Social security plans are usually less expensive than long-term disability plans, and the benefits last for the entirety of your disability. However, the benefit amount with social security can be significantly less than long-term disability. Long-term disability benefits usually cover 60% of your gross monthly income whereas social security benefits average about $1,154 per month. Something else worthwhile to note is that claims with social security can take a long time to be approved.

Who is Long-Term Disability Insurance For?

Many of us may become disabled at some point. Preparing for your future is key to ensuring your financial security and success. If you are afflicted by an illness or injury that prevents you from completing your occupational duties, you will be able to file a claim. Whether this is a musculoskeletal disease, cancer, mental health issue, or serious illness, long-term disability insurance is designed to help everyone through a time of great need. 

McFie Insurance is here to help you secure your financial future. Learn more about our disability insurance and get a quote by calling 702-660-7000.

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