Many long-term disability insurance (LTD) plans are offered through employers, as part of the benefits package they offer to employees. Just like many people have health insurance through their jobs, and others purchase individual policies, individuals who are not offered LTD through their employers may still be able to purchase long-term disability through the consumer market. The premiums for these individual LTD plans can be quite expensive, so if you are considering this type of investment you will probably want to perform a thorough evaluation of the value and cost of long-term disability. To determine “Is LTD insurance a good investment?” in your particular situation, you may also want to compare the pros and cons of LTD policies you are considering, with your other options for creating a financial safety net. A few pointed questions may help you to start your evaluation process.
How Many Years Would You Expect To Work Between Now and Taking Retirement?
Generally speaking, the more working years you think you have left, the greater the financial damage would likely be if you became disabled before you reached your planned retirement age. Keep in mind, however, that for many people the benefits of seniority and a well-earned professional reputation can make the final active years of their careers the most financially rewarding, especially relative to hours worked per week. For this reason, you may wish to consider thinking of the timespan of your future in the workforce as progressively “weighted” from a financial perspective, toward its more distant end.
Are You the Primary Earner in Your Household?
For people who live alone, the answer will obviously be yes. For many other possible combinations of incomes and dependents, a “yes” may prompt some follow-up considerations.
Is There Anyone Else in Your Household Who Could Easily Replace Your Income?
In this case, if you are single and you live alone, the answer will be “no.” For single parents who share custody with their exes, the answer may be, “No, but there is someone who could take care of my kids,” even though the necessary modifications to your custody order might be disruptive for all involved.
What Work Would Need To Be Redistributed for Another Adult To Make Up Your Income?
For primary earners in households with at least one other adult who could step up to replace a significant portion of the family’s lost income if you became disabled, it may be helpful to also ask yourself: “What household contributions, such as food preparation, maintenance chores, errands, and childcare, would need to be redistributed for someone else in the home to work full-time, or increase his or her earning potential?” The practical and financial impact of reassigning whatever contributions this person is currently making to the smooth operation of your shared home should be factored into any calculations for the value and cost of long-term disability insurance.
Weighing the Pros and Cons of LTD Policies Based on Household Composition
Broadly speaking, the greater the impact your loss of income would have on your household’s financial security, the more likely it is that the answer to “Is LTD a good investment?” will be yes in your particular case. On the other hand, the more plausible it is that someone else in your family circle would be able to make adjustments to cover the majority of the shortfall within six months to a year, the more likely it is that when you put the pros and cons of LTD policies on a scale, the scale will tip toward the cons.
What Is Your Current Income?
The greater the gap between your current monthly income and the amount you could expect to receive monthly if you qualified for another type of disability benefit, such as Social Security Disability Insurance (SSDI), the more important the potential long-term advantages of LTD are likely to be if you become disabled. The smaller that gap, the smaller the benefit LTD is likely to offer you.
For instance, individuals who work 40 hours per week at the federal minimum wage would, in 2025, still earn less than the SSDI threshold for substantial gainful activity (SGC). If this describes your situation, then your analysis of the value and cost of long-term disability insurance will need to account for the fact that the percentage of your income an LTD policy would replace might still be insufficient to cover basic survival needs. On the other hand, for people whose incomes are several times this amount, then “Is LTD insurance a good investment?” may deserve a resounding yes, particularly if a sharp reduction in income would necessitate major lifestyle changes.
What Is Your Current Occupation?
If you currently work in a highly specialized role that places intensive demands on you mentally or physically, and if you earn a premium for performing this challenging work, then any assessment of the value and cost of long-term disability insurance in your particular case will likely need to consider whether the policy in question is an own-occupation policy vs. any-occupation policy:
- Own occupation LTD: Provides benefits when the policyholder is no longer able to perform the work in their chosen field, typically work for which they have received significant training or in which they have substantial experience
- Any occupation LTD: Provides benefits when the policyholder is no longer able to work in any job, regardless of whether the work is similar to what he or she was doing prior to becoming disabled
Many long-term disability insurance policies provide own occupation coverage for a limited period, during which the disabled individual is expected to retrain for another career field that offers employment within their newly limited capabilities. The pros and cons of LTD policies can differ widely based on how the policy handles the own occupation vs. any occupation distinction, so you may wish to work with an attorney working in disability law to make a close examination of policy terms as you weigh your options.
Evaluating Your Answers: Is LTD Insurance a Good Investment?
Whether long-term disability insurance is a worthwhile investment in any situation depends largely on the policy’s terms and how you answer a few core questions about your own needs. Instead of thinking about whether LTD insurance is a good investment in an abstract sense, it can be more helpful to consider the specific financial challenges you might face if you became disabled during your working years. This perspective allows you to evaluate how well different policies would address those challenges. The advantages and drawbacks of LTD coverage can vary depending on factors like your current income, how reliant you are on a specialized profession, and what other resources you could access if you were unable to work. Taking time to answer key questions about your financial picture can make it much easier to decide whether LTD insurance makes sense for your unique circumstances.
Making The Right Decision For Your Future
Choosing whether to invest in long-term disability insurance is ultimately a personal decision that requires careful reflection on your household needs, income, and professional risks. While no policy can eliminate the uncertainty of the future, thinking through the practical impact of losing your income and comparing different types of coverage, can help you feel more prepared and confident in your choice. By taking time to weigh the real-life costs and benefits, you’ll be in a stronger position to decide whether LTD insurance is the right safeguard for your financial stability and peace of mind.
