One in four workers will suffer a disability while they are still employed. Accordingly, long-term disability insurance claims are important because this insurance pay a portion of income for workers who are unable to work because of injury or illness.
Unlike short-term disability insurance, a long-term policy can cover part of your income for many years and, in some circumstances, up to retirement.
Benefits
Long-term disability insurance helps pay for recurring costs like mortgage payments, childcare and groceries while you cannot work. It provides household income.
Benefits usually last from five to 10 or 20 years or even up to retirement age.
Amounts may be from 60% to 80% of your monthly salary. Experts recommend 60% of post-tax income.
The waiting period is usually 90 days. Coverage may be obtained from an employer or private plan.
Long-term disability is typically equivalent to one to three% of income. Employer plans are usually less expensive than privately purchased coverage. Cost factors include coverage amount, benefit period, waiting period, age, gender, health, lifestyle, and occupation.
Coverage
To qualify for benefits, workers must file a claim describing their illness or injury and wait for insurance company approval. The most common conditions include:
- Musculoskeletal disorders
- Cancer
- Fractures, sprains and muscle and ligament strains
- Mental health conditions
- Circulatory diseases, heart attacks and strokes
The following conditions are usually excluded from coverage:
- Pre-existing conditions starting within the first year of effective date
- Crime related injuries if there is a conviction
- Disabilities during incarceration
- Revoked professional licenses
- Self-inflicted injuries that are not accidental
- Active participation in a riot
- War
- Workplace injuries except for some coverage for injuries that are not covered by workers’ compensation
Eligibility
Eligibility depends on the terms of the insurance policy. An own-occupation disability policy provides benefits if you are unable to perform your job but still can work elsewhere. It has two subtypes.
The first subtype is a transitional own-occupation provides a benefit amount equal to the total disability amount less income received from your next role. A modified own-occupation pays benefits in the workers’ field of expertise if they are not employed elsewhere.
The second general policy is any-occupation disability. Workers qualify for benefits if they are unqualified to keep any job. This is the strictest but less costly type of disability coverage because coverage approval is limited.
