Long Term Disability Insurance
In the case of a long term absence from work, a combination of short term disability insurance benefits and other savings may not be enough to sustain your family financially. This could leave you vulnerable to financial burdens, such as mortgage foreclosure or default on debt, for example. A long term disability (LTD) insurance policy can help protect you and your family from situations such as this as it replaces some of your income for an extended period of time. These insurance policies provide comprehensive, long-term benefits that will cover you in the event of accident and sickness. There are also additional rider options available for a long-term policy, allowing you to tailor coverage to your unique needs.
The benefit period on these policies ranges from two years or until age 67. Different states do have different regulations governing the length and availability of long term (and short term) disability insurance, so it is important to talk with a licensed insurance agent in your area to confirm this timeframe.
To be covered by long term disability insurance, you or your employer must pay a monthly premium. When an illness or injury prevents you from working and you are running out of other benefits, such as sick days and Short Term Disability Insurance (STD), you apply for benefits by speaking with your human resources representative or by contacting your insurance agent.
Just as with Short Term Disability policies, Long Term Disability policies will require documentation from your doctor that explains your condition and estimates how long you will be unable to work. Again, there will be a waiting period between the date you leave work and the date you actually get your benefits. Depending on your plan, the waiting period can be anywhere between 90 days to a year before benefits are paid. If you get STD and are covered by LTD, your STD benefits may automatically convert to LTD after a certain period.
Once the waiting period is over, you will generally get a set percentage of the wages you earned before you were disabled. Although the amount varies, payments are generally around 60% of your previous wage. For example, if you were paid $2,000 per month at work and your policy pays 60% of pre-disability earnings, you will get a benefits check of $1,200 per month. Depending on your LTD policy, you may get benefits for a set number of years, like 2 years or 5 years, or until a certain age, like 67.
After or during your LTD benefits period, you may want to apply for Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), or other cash benefits programs. Some policies require that you apply for SSDI.
If you are enrolled in SSDI or SSI while also being enrolled in LTD, your LTD benefits may be reduced. The advantage of being enrolled in SSDI or SSI while receiving LTD is that they can help you become eligible for Medicare or Medical Assistance (MA) health benefits, which are not covered by LTD.
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