Most long-term disability insurance (LTD) policies are employer-sponsored group plans. However, self-employed individuals and those working for employers who do not offer LTD can choose to purchase individual long-term disability insurance directly from an insurance company operating in their state. Although selecting the best LTD insurance policy options based on your personal circumstances can sometimes be difficult, using a long-term disability plan guide that offers perspective on some of the most significant factors affecting plan suitability can often help you make useful long-term disability insurance comparisons.
What Is a Good Rate for Long-Term Disability Insurance?
One of the first factors that most people will want to look at in any long-term disability insurance comparison is the cost of premiums for each policy. If you have previously had long-term disability insurance through your workplace and are now choosing a long-term disability plan because you are changing jobs and your new employer does not offer LTD coverage, one point to keep in mind is that individual LTD policies tend to have higher premiums than policies purchased as part of a group insurance plan.
Policies obtained as part of an employer-sponsored group plan may also be more likely to package short-term disability insurance (STD) and LTD coverage together, so in selecting the best LTD insurance policy terms, you may also want to consider whether it makes sense for you to purchase STD coverage separately. As daunting as these differences between individual vs. group long-term disability insurance may seem, it is also worth noting that in many cases LTD policies purchased individually may also replace a higher percentage of your lost income than is common under group plans.
At What Age Should You Stop Long-Term Disability Insurance?
Some employer-sponsored plans may provide options to facilitate a smooth transition into receiving retirement benefits that were included in your employee incentives. Individually-purchased policies will not usually be in a position to offer the same facilitation. With or without a connection to employee retirement benefits, long-term disability insurance policies will almost always end their formal coverage when the policyholder becomes eligible for Social Security retirement income.
How To Choose Long-Term Disability Insurance?
Whether you are selecting the best LTD insurance policy options because you are self-employed, because you are changing employers, or simply because concern for your future has prompted you to take steps to protect your long-term financial stability, one of the factors you will likely want to consider is the three-way relationship between the following pieces of information:
- Your current age
- The age at which you hope or plan to retire
- The maximum duration of benefits under each policy you are considering
Many people find it helpful to let their age when choosing a long-term disability plan guide them toward policies that help close the potential gap between becoming disabled and becoming eligible for retirement. Generally, the more years you have left to work when choosing a long-term term disability plan, the longer you might need the coverage to last.
How To Pick a Disability Insurance Policy?
There are a few different categories into which you can divide disability insurance policies. Each set of categories is based on a distinct set of distinguishing features. What this means for individuals selecting best LTD insurance policy options is that, by trying out multiple ways of grouping policies, they can gain a broader perspective on the available options for their long-term disability insurance comparisons.
Some of the most practical features by which you may wish to sort LTD plans include:
- Benefit period
- Percentage of income replaced
- Definition of disability
- Excluded vs. qualifying conditions
Any effective strategy for selecting the best LTD insurance policy terms will need to take into account personal needs and priorities. Although there can be many different considerations based on individual circumstances, many people find that evaluating plans in light of each of these factors as they are choosing a long-term disability plan guides them toward a deeper understanding of which features matter most to them in their own situations.
Selecting the Best LTD Policy Terms by Percentage of Income Replaced
One of the most obvious factors most people will want to consider in selecting the best LTD policy terms is the percentage of former income the policy will replace. You may find considerable variation in this specific feature as you are making your long-term disability insurance comparison, but a good rule of thumb in choosing a long-term disability plan is that a higher percentage of income replaced generally correlates with a higher premium rate over the life of the policy.
Offset Provisions
The offset provisions common in many LTD plans can sometimes complicate the total amount a policyholder receives in monthly long-term disability benefits. Most long-term disability policies will include provisions requiring individuals submitting LTD claims to also file applications for Social Security Disability Insurance (SSDI). In many cases, they may also require applications for workers’ compensation disability benefits if the disabling condition is work-related. In both cases, the primary reason for imposing these requirements is to activate a policy’s “offset” provisions. These “offsets” allow the insurance provider to reduce the amount of benefits paid monthly by the amount the insured person receives from any source covered by an offset provision.
How Offset Provisions Work
Another way of looking at the offset provisions is to consider that long-term disability insurance policies with offset provisions typically are not guaranteeing that they will pay an amount equal to a certain percentage of the policyholder’s pre-disability income. More often, they are promising to pay the difference between that amount and the total benefits the individual receives from all other sources subject to offset provisions. Offset provisions do vary between policies, so be sure to include a close examination of offset provisions in any long-term disability insurance comparison.
Choosing a Long-Term Disability Insurance Plan: Guide to Benefit Periods
The length of time a long-term disability policy pays for an approved claim is called the benefit period. There are three other terms that are important to understanding benefit periods:
- Exclusion period
- Elimination period
- Duration of benefits
The exclusion period is the length of time between enrolling in a policy and becoming eligible for coverage. These exclusion periods are always determined by the terms of the specific policies, but 90 days is a very common range. The elimination period, on the other hand, is the period of time between disability and benefits eligibility. This period counts from the date when the individual’s disability begins, not from the date when the claim is submitted. Since pre-existing conditions are almost always excluded, the elimination period cannot usually begin until well after the exclusion period is over, but be sure to check the terms of your policy.The duration of benefits is the period of time over which benefits will be paid for an approved claim. Some policies may pay for as little as two years. Others pay for five or 10 years. The most comprehensive plans may provide coverage up to retirement eligibility. As many choosing a long-term disability plan will note, it is common for policies to limit the benefit period for specific conditions. Another feature to watch for in selecting best LTD policy terms is whether the benefit period applies to own occupation vs. any occupation disability.
Choosing a Long-Term Disability Benefit Plan: Guide to Excluded vs. Qualifying Conditions
Many long-term disability insurance policies include lists of qualifying conditions and excluded conditions. The qualifying conditions list does not necessarily include all conditions that might potentially be covered under a particular policy. Instead, in choosing a long-term disability insurance plan guide, you can think of the list of qualifying conditions as a set of diagnoses that the insurance company has already acknowledged are disabling under the terms of the policy. In practical terms, what this often means for submitting an application for LTD benefits is that the application will need to provide medical evidence to document that the policyholder has a specific condition. For diagnoses included on a list of qualifying conditions, the individual will not usually need to also prove that the condition itself is disabling in their particular situation.
If you are applying for LTD benefits because of a condition that is preventing you from returning to work, but is not a diagnosis included on your policy’s list of qualifying conditions, then in many cases you may still be eligible for benefits if you can show that your condition meets the policy’s definition of disability. The notable exception would be if the cause of your disability appears instead on a list of excluded conditions, in which case the claim will usually be denied regardless of its severity.
Selecting Best LTD Policy Terms: Understanding Insurance Policy Definitions of Disability
Beyond excluded vs. qualifying conditions, another angle from which to examine definitions of disability in conducting your long-term disability insurance comparison is to consider how each policy handles own occupation vs. any occupation disability. Some policies will define disability in such a way that only “any occupation” disability is eligible for benefits; others will draw a clear distinction and differentiate benefit eligibility in stages.
Own Occupation
“Own occupation” disability means that the individual is prevented from returning to work in his or her own profession. Choosing a long-term disability plan for individuals in highly specialized fields, such as medicine, will often recommend seeking out this type of coverage. Own-occupation coverage is generally most important to selecting best LTD insurance policy options if you doubt that you would be able to retrain within a few years to achieve earnings comparable to your pre-disability income in a different and potentially less-demanding type of work.
Any Occupation
An “any occupation” disability insurance policy only provides benefits if the policyholder is unable to return to work in any occupation. Usually any-occupation plans apply a stricter definition of disability than do policies providing benefits for own-occupation disability. However, some policies operate on a step-down system.
Long-Term Disability Insurance Comparison: Own-to-Any Occupation Plans
Policies using the own-to-any step-down logic typically provide benefits for “own occupation” disability during an initial period, often two to five years. This own occupation benefit period is designed to allow individuals who are not realistically able to return to their former job positions to acquire skills appropriate to an alternate career that is within their altered abilities. After the own occupation benefit period is over, benefits eligibility will be based on the stricter “any occupation” definition of disability.
Making Adjustments to a Long-Term Disability Insurance Comparison: Adding Riders for Flexibility
If your long-term disability insurance comparison reveals a number of plans that might fit your needs except for its use of an “any occupation” definition of disability, then you may need to let choosing a long-term disability plan guide you toward considering riders. Riders and similar add-on options give individuals selecting the best LTD insurance policy terms for their circumstances to purchase additional coverage to enhance a more basic policy. Depending on your situation, sometimes these add-ons can allow you to achieve customized coverage at a competitive price point.
What Is the Best Long-Term Disability Insurance?
Anyone choosing a long-term disability plan guide needs to acknowledge the importance of individual concerns and personal priorities. Selecting the best LTD insurance policy terms always depends on what the individual selecting the policy most wants and needs. That said, most LTD policies can be evaluated in terms of a few key features. By assessing the combination of features in each policy in relation to the priorities dictated by your own circumstances, you can conduct a long-term disability insurance comparison that makes it easier to make an informed decision.
Making the Right Choice for Your Future
Selecting the best long-term disability insurance policy is a highly personal process that requires balancing your budget, your career goals, and your tolerance for risk. By taking the time to understand how each plan defines disability, how long benefits will last, and how offset provisions and exclusions could impact your payments, you can make more confident decisions about your financial protection. If you need help weighing your options or reviewing policy language, consider speaking with a disability insurance professional or an attorney who can help you navigate the fine print. With the right guidance and preparation, you can secure coverage that gives you peace of mind and safeguards your income should the unexpected happen.
