Long-Term Disability Insurance

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is Long-Term Disability Insurance?

Long-term disability insurance is a policy that provides financial support to individuals who are unable to work due to a prolonged illness, injury, or permanent disability. Unlike short-term disability insurance, which covers only a few months, LTD insurance can last for several years or even until retirement.

Definition: At its core, LTD insurance covers lost income due to disabilities that prevent an individual from working. It’s a financial buffer, ensuring that even if you’re unable to earn, you can still meet your financial obligations.

Key Takeaways:

  • Long-term disability insurance is a prolonged coverage that provides financial support
  • On average, you can expect to pay between 1% to 3% of your annual income
  • LTD covers physical injuries and well as illness and mental health

Why Would Someone Choose to Get LTD Insurance?

The answer is simple: security. According to the Social Security Administration, a 20-year-old worker has a one-in-four chance of becoming disabled before reaching full retirement age. Without LTD insurance, you could face financial ruin. Here are some reasons why individuals opt for LTD insurance:

  • Mental Health Concerns: Modern policies recognize mental health as a valid reason for disability. Depression, anxiety, and other mental health issues can prevent someone from working, making LTD insurance a crucial safety net.
  • Protection Against Lost Income: If you’re the primary breadwinner, your inability to work could jeopardize your family’s financial stability. LTD insurance ensures that you continue receiving a portion of your income.
  • Affordable Premiums: When compared to the potential loss of income, the premiums for LTD insurance are relatively affordable, making it a wise investment.
What Is Long-Term Disability Insurance

What Does LTD Insurance Cover?

LTD insurance covers a percentage of your income, typically between 60%-80%. The exact amount depends on the policy you purchase. Coverage includes disabilities arising from:

  • Physical Injuries: Such as accidents or repetitive stress injuries.
  • Illnesses: Like cancer, heart disease, or neurological disorders.
  • Mental Health Issues: Including depression, anxiety, and other disorders.

How Much Does Long-Term Disability Insurance Cost?

On average, you can expect to pay between 1% to 3% of your annual income, but your actual cost will depend on various factors:

  • Age:
    • The older you are, the higher the premium, as age often correlates with increased health risks.
  • Health:
  • Occupation:
    • Jobs with higher risks (e.g., construction) may have higher premiums than desk jobs.
  • Waiting Period:
    • The duration you choose to wait before benefits kick in after a disability. A longer waiting period can reduce the premium.
  • Coverage Amount:
    • The percentage of your income the policy will cover. Higher coverage amounts typically mean higher premiums.
Long-Term Disability Insurance

Private Coverage vs. Employer-Provided LTDI Coverage

Although numerous employers provide short-term disability benefits, long-term disability insurance is less commonly offered. As a result, many employees turn to individual policies for comprehensive protection. To guarantee optimal coverage, it’s prudent to complement employer-based insurance with a personal long-term disability policy.

Best Companies For Long-Term Disability

Rates are influenced by factors such as occupation, age, risk elements, and coverage amount, so there isn’t a universal solution. For blue-collar workers seeking more modest plans, we highly recommend Assuirty. On the other hand, Petersen is our preferred choice for high-income individuals in search of high-limit plans. Both companies provide significant coverage choices and feature cost-effective premiums in relation to their benefits.

Benefits of Long-Term Disability

  • Total Disability Monthly Benefit: Payable after the elimination period for those totally disabled until the disability ends or the maximum benefit period is reached. Only one disability will be compensated in cases of multiple concurrent disabilities. A subsequent disability is considered new after a year of full-time work without benefits.
  • Partial Disability Monthly Benefit: For those partially disabled and working part-time after total disability, 50% of the base benefit is provided for up to six months or until partial disability ends.
  • Presumptive Disability Benefit: Total Disability Monthly Benefit is paid regardless of the ability to work or physician care, with no elimination period, in the event of presumptive disability.
  • Home Modification Benefit: After six months of Total Disability Monthly Benefits, costs for home modifications are covered up to six times the base benefit.
  • Survivor Benefit: A lump sum is paid to beneficiaries if the insured dies while receiving benefits, having done so for at least 12 consecutive months.
  • Vocational Rehabilitation Benefit: After six months of benefits, the cost of vocational rehabilitation may be covered, up to six times the base benefit, pending approval from Assurity.
  • Organ Donor Benefit: Benefits for disability due to organ donation surgery are on par with other sicknesses once the elimination period is met and the policy is active for six months.
  • Waiver of Premium: Premiums are waived after the insured is totally disabled for the elimination period or 90 days, with refunds for any premiums paid thereafter.

Comparing Long-Term Disability Insurance and Short Term Disability Insurance

FeatureLong-Term Disability Insurance (LTD)Short-Term Disability Insurance (STD)
Coverage DurationTypically 2 years to retirement ageTypically 3-6 months
Waiting PeriodUsually 90 days or moreTypically 7-14 days
Benefit Amount50-80% of salary50-80% of salary
PurposeCover prolonged illnesses or injuriesCover temporary illnesses or injuries
Premium CostGenerally higherGenerally lower
Common Causes of ClaimsMusculoskeletal disorders, cancer, mental health issuesInjuries, pregnancies, minor surgeries
Policy ExclusionsPre-existing conditions, certain mental health disordersPre-existing conditions, work-related injuries (covered by workers’ compensation)
Tax ImplicationsBenefits may be taxable if premiums are paid by the employerBenefits may be taxable if premiums are paid by employer
Optional RidersCost of living adjustment, future purchase optionTypically fewer options compared to LTD
RenewabilityOften non-cancellable or guaranteed renewableTypically conditionally renewable
Long-Term Disability vs. Short-Term Disability

Please note that the specifics of each policy can vary based on the insurance provider, the policyholder’s occupation, and other factors. It’s essential to read the policy details and consult with an insurance professional when considering disability insurance.


Long-term disability insurance is more than just a policy; it’s peace of mind. In the face of uncertainties, it ensures that you and your loved ones remain financially secure. As with any significant decision, research thoroughly, understand your needs, and choose a policy that offers comprehensive coverage. Remember, it’s not just about protecting your income; it’s about safeguarding your future.

Long-Term Disability Insurance Quotes

Get a long-term insurance quote from a licensed financial professional. This service is free of charge.

Disability Insurance Inquiry

Frequently Asked Questions

Is long-term disability insurance a waste of money?

Long-term disability insurance is not generally considered a waste of money. It provides financial support if an individual cannot work due to a chronic illness or injury.

What is the purpose of long-term disability insurance?

Long-term disability insurance provides financial protection by replacing a portion of income if an individual cannot work due to a prolonged illness or injury.

What are three examples of long-term disability insurance uses?

Long-term disability insurance covers living expenses and medical bills and maintains lifestyle stability if an individual cannot work due to chronic illness, injury, or disability.

Do you need long-term disability insurance?

Long-term disability insurance may benefit individuals seeking financial protection against loss of income due to chronic illness or injury.

Do you have to pay taxes on long-term disability?

If your long-term disability insurance policy is employer-sponsored and the premiums were paid with pre-tax dollars, the benefits you receive would be subject to income tax. However, the benefits are typically tax-free if you pay the premiums with after-tax dollars.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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