Navigating the ins and outs of long-term disability (LTD) insurance can be tricky. However, when unexpected illnesses or injuries disrupt your ability to work for an extended period, LTD insurance can be a financial lifesaver. Whether you’re considering purchasing a policy or simply looking to understand your existing one better, here’s all you need to know about long-term disability.
What is Long-Term Disability Insurance?
LTD insurance is designed to compensate you for a portion of your lost income if you cannot work for a lengthy period due to injury, illness, or accident. Unlike short-term disability insurance, which covers a few months, LTD insurance can sometimes span years, right up to retirement. Two types of long-term disability insurance policies are typically offered:
- Any occupation disability insurance
- Own occupation disability insurance
If your disability doesn’t allow you to work anywhere, you’d be eligible for any occupation disability insurance. If your disability only restricts you from practicing your regular profession, you’d be eligible for own occupation disability insurance.
How Does It Work?
If you become disabled and meet a policy’s criteria:
- Before benefits kick in, you’ll typically have a waiting period (often 90-180 days). This period is called the “elimination period.”
- Once approved, you’ll receive a percentage of your salary. The exact amount varies but often ranges between 60% to 70%.
- Payments continue for the duration of your disability or until the policy’s expiration date, whichever comes first.
Where Can I Get Long-Term Disability Insurance?
There are two main avenues:
- Employer-Provided: Many companies offer LTD insurance as a part of their benefits package. It’s often more affordable but less comprehensive than individual policies.
- Private/Individual Policies: These policies are purchased independently and can be tailored to your needs but might be more expensive.
The cost of LTD insurance depends on:
- Benefit Amount: Higher monthly benefits equate to higher premiums.
- Benefit Period: The longer the policy pays out, the more expensive it is.
- Occupation: Riskier jobs might entail higher premiums.
- Age and Health: Younger and healthier individuals typically get better rates.
If you want coverage for more than one disability, you’ll have to pay more, and if you get an insurance policy for a disability that you already have, the costs will go up. Generally, long-term disability insurance policies cost around 1 – 3% of your annual income.
What is Generally Covered?
While coverage specifics can vary:
- Typically Covered: Chronic illnesses, physical injuries, mental health disorders, and more.
- Not Covered: Pre-existing conditions, disabilities from self-inflicted injuries, or specific conditions outlined in the policy.
Many policies offer riders or add-ons at an additional cost, including:
- Cost-of-Living Adjustment (COLA): Increases your benefit to keep up with inflation.
- Future Purchase Option: You can increase coverage as your salary grows without a medical exam.
- Return of Premium: Refunds some of your premiums if you don’t use the policy over a specific period.
The End to Benefits
The financial benefits of a long-term disability insurance policy will end if you can go back to your occupation in the capacity before the disability. However, you may still get some benefits depending on your employment status in relation to the policy.
Your San Diego Long-Term Disability Attorney
Long-term disability insurance provides peace of mind in an unpredictable world. Though it’s an added expense, the financial stability it offers during challenging times can be invaluable. Understanding your policy, evaluating your needs, and making informed choices help to safeguard your future. Consulting with a legal professional like Bonnici Law Group can provide you with the expertise and support needed to navigate long-term disability insurance and the process it takes to obtain it. Call us at (619) 815-7790 or click here to schedule a FREE consultation.