Long-term disability insurance helps to provide the policy holder with financial stability in the event that a serious injury, a severe illness, or disability prevents them from working for an extended period. Disability insurance of this type is not generally intended to fully replace the policy holder’s income, but rather to cover a substantial portion of the individual’s normal expected income until he or she is able to return to work. The maximum duration the insurance benefits will cover, as well as the length of what is typically called the “elimination period,” will vary from plan to plan.
Whether you already have a policy and are seeking an improved understanding of how long-term disability insurance works, trying to identify the steps to file a long-term disability claim, or just beginning the search for the long-term disability insurance plan that fits your needs, a conversation with a disability attorney will help you understand your legal rights regarding long-term disability insurance.
How Much of a Policy Holder’s Income Does Long-Term Disability Insurance Cover?
The exact percentage of a policyholder’s income covered by long-term disability benefits will depend on the terms of the individual policy. The non-profit Patient Advocate Foundation (PAF) names a range of 50-70% of the policyholder’s pre-disability earnings as common. Unsurprisingly, policies with premiums at the lower end of the scale tend to also have lower benefits relative to the policy holder’s regular pay, and policies offering a more robust percentage as partial wage replacement often come with higher premiums, as well.
Understanding the Difference Between Short-Term vs. Long-Term Disability
Individuals searching for insurance that will help to cover a shortfall in income due to unexpected injury or illness may choose short-term disability insurance (STD), long-term disability insurance (LTD), or both. Because the policies are activated by similar circumstances and are generally intended for similar goals, it is not unusual for people shopping for disability insurance to have questions about the difference between short- and long-term disability insurance plans.
Short-term disability benefits cover a shorter period of time, typically six months or less. Long-term disability insurance may pay out over many years, potentially until the policy holder reaches the age for retirement (often defined as becoming eligible for Social Security retirement benefits). One implication of these endpoints that individuals comparing disability insurance plans should not overlook is the starting point from which coverage begins. Short-term disability insurance plans often begin paying within a few weeks, whereas long-term disability insurance may not begin paying until short-term disability coverage ends. Additionally, long-term disability insurance may require additional proof of the projected duration of the disability, particularly if the condition is expected to be long-running but not permanent.
What Qualifies as “Disabled” for Long-Term Disability Insurance?
The definition of disabled can be one of the most crucial factors in determining whether your long-term disability insurance plan functions as intended when you need it most. However, many individuals assume they know what “disability” and “disabled” mean. The critical point in determining your coverage will be not how you define disabled or disability, but how the terms of your policy define these words. For this reason, you may wish to review the policy descriptions for any plans you are considering with an attorney who has experience in disability law, prior to making any major decisions.
What Conditions Are Covered by Long-Term Disability?
Long-term disability insurance plans may cover a wide range of conditions. Generally, the eligibility of the condition is related less to its severity than to its duration. Long-term disability insurance is not intended to make up for short hospital stays due to acute injury or infection, provided that the recovery timeline is relatively short. Importantly, long-term disability insurance policies may not be prohibited from denying coverage for pre-existing conditions in the same way as standard health insurance plans offered by employers under the Affordable Care Act (ACA). Qualifying conditions for long-term disability benefits may be similar to those established by the Social Security Administration (SSA), but generally they are set by the insurance company and outlined in the terms of the policy.
How Long Do Long-Term Disability Benefits Last?
“Long-term” can cover significant variations in the duration of coverage. Prior to choosing a long-term disability insurance plan, you will likely want to examine how long the coverage eligibility of each policy you are considering will last. When thinking about how long disability benefits last for any specific plan, take into consideration your age now and your hoped-for age at retirement. If your current age and stage of your career suggest that you will likely be working for decades to come if nothing interferes, then choosing a policy that provides income benefits for many years, potentially to retirement eligibility, may be a priority for you. If you are expecting to work only a few more years before retiring from the workforce, this may impact your decision. However, it is important to note that the last years of an individual’s career can often be among the most lucrative.
Understanding Long-Term Disability Insurance
Understanding how long-term disability insurance works, what it covers, and how it may fit into your broader financial planning is essential to protecting yourself and your family in the event of a serious illness or injury. Because the details of each policy, such as definitions of disability, coverage amounts, elimination periods, and exclusions, can have a profound impact on your ability to collect benefits when you need them most, it is wise to review your options carefully before making any decisions. If you have questions about your rights under a current policy or need guidance in selecting the coverage that best fits your situation, consider speaking with an experienced disability attorney.
