Long-Term Disability Insurance

Shawn Plummer

CEO, The Annuity Expert

In today’s economy, it is more important than ever to have insurance coverage in case of an unexpected illness or injury. However, one type of insurance that is often overlooked is a long-term disability plan. This guide will explain what long-term disability insurance is and how the coverage works. We will also discuss some benefits of this type of insurance policy.

What Is Long-Term Disability Insurance?

Long-term disability insurance is disability insurance that safeguards a portion of your salary if you’re out of work for an extended time due to a covered impairment, such as an illness or injury. For example, absences can be caused by accidents at work or outside of work.

How Does Long-Term Disability Coverage Work?

If you are paying for disability insurance and unfortunately become disabled and unable to work, you will file disability claims with your diagnosis and other supporting documents. After the pre-determined waiting period, you will receive benefits on schedule.

Is it Worth Taking Long-Term Disability Insurance?

Disablement is a genuine risk that we all face, and disability insurance helps protect us from financial fallout. However, if you don’t have coverage and suddenly find yourself unable to work, it can be challenging to make ends meet and save for the future.

What are the Advantages and Disadvantages of Being on Disability Insurance?


  • Safeguards your ability to receive a salary
  • Keep your loved ones safe
  • The benefits are tax-free if you use after-tax dollars to pay for your policy.
  • You are free to spend your benefits as you please.
  • Assists with meeting current financial commitments
  • You can avoid going bankrupt or getting into debt
  • It allows you to focus on recovering
  • A sense of tranquility


  • Premiums for disability insurance can be expensive
  • Policies often exclude coverage for pre-existing personal factors
  • The waiting period is the time frame in which you must wait before your insurance coverage kicks in.
  • If you don’t have a disability, you can’t get your monthly benefit.

Why Do People Go on Long-Term Disability?

Long-term disability insurance (LTD) is an insurance policy that gives money to someone who cannot work for a long time because of sickness, injury, or accident. This type of insurance typically provides employees with some of their income while they cannot work.

Is it Better to Go on Disability or Retire?

By waiting until you reach retirement age to collect, you will receive benefits. If you choose to retire early, your benefits are permanently reduced. However, if you wait and continue to receive Social Security Disability Insurance payments until the full retirement age is reached, there is no reduction in your future retirement benefits.

Does Being on Disability Affect Your Credit?

You are having Supplemental Security Income (SSI) or  Social Security Disability Insurance (SSDI) will not lower your credit score because neither income nor benefits are taken into account when a credit score is calculated.

What are the Benefits of Long-Term Disability Insurance?

Long-term disability insurance is supplemental coverage that provides financial support to those unable to work due to long-term injury or illness. This plan works in collaboration with short-term disability, and once the benefits from the latter have been used up, the former steps in to help provide some income for the employee until they can return to work.

Should I get Both Short Term and Long Term Disability?

Whether or not you should get short-term and long-term disability insurance depends on your circumstances and needs. In general, it is a good idea to have some form of disability insurance to protect yourself and your family if you cannot work due to an illness or injury. If you have a stable job and a good income, you may consider getting both short-term and long-term disability insurance to provide you with financial support in case of a disability.

How Long Are Most Long-Term Disability Policies?

While most long-term disability plans only cover claimants for an average of 3 years, a private insurance company is typically much more generous in their coverage. Those companies typically offer coverage for two years, five years, ten years, or up to age 65. Once the benefit period runs out, the benefit is over.

Is Disability Income Taxable?

Disabilities caused by accidents or health conditions that your employer-sponsored plan covers will be considered taxable income. If both you and your employer pay into the premiums, only the amount of money received from disablement covered by your employer will be taxed.

What Conditions Automatically Qualify You for Disability?

Musculoskeletal System

According to the SSA, most people who begin receiving benefits have damage to their nerves, muscles, tendons, or ligaments due to diseases of the musculoskeletal system and connective tissue. Some examples include:

  • Arthritis
  • Fibromyalgia
  • Back pain
  • Reflex Sympathetic Dystrophy (RSD).

Mental Illness

Social Security benefits can be given to those with a qualifying mental disorder, which according to the Social Security Administration, is nearly 20% of disabled cases. For an applicant to qualify, they must have a severe mental condition diagnosed by a medical professional that limits them in some way. Examples include:

  • Mood disorders
  • Autism or Asperger’s syndrome
  • Schizophrenia
  • Depression
  • PTSD

Cardiac Disorders

According to the SSA, approximately 10 percent of claimants awarded benefit periods suffer from a circulatory disorder. Some disorders in this category are:

  • Angina
  • Heart diseases
  • Hypertension

Nervous System

The SSA reports that, in 2015, 10% of claimants awarded disability insurance benefits had neurological disorders. Examples include:

  • Parkinson’s diseases
  • Blindness
  • Epilepsy
  • Hearing loss

Are 6 Months Considered Long-Term Disability?

There are two types of disability insurance coverage: short-term and long-term. Short-term benefit periods typically last between three to six months, while long-term disability benefits can last for years or until retirement age.

Can You Combine Long-Term Disability Insurance and Social Security?

In most cases, you can receive both SSDI benefits and LTD benefits. However, many long-term coverage companies require policyholders to apply for an SSDI benefit period in addition to their payments.

How is Long-Term Disability Calculated?

Most long-term disability insurance policies will give you 60 percent of your gross pay if you cannot work. Therefore, the annual and monthly Gross LTD Benefit numbers are just 60 percent of what your gross annual wage and gross monthly wage would be.

What Percent of People Go on Long-Term Disability?

The average 20-year-old has a 30% chance of developing a six-month-long impairment, whereas the likelihood of dying before age 65 is only 17%. Out of every seven people, one, on average, will experience a long-term disability lasting five years or more before age 65.

Why Would Long-Term Disability be Denied?

If you or your doctor don’t submit the appropriate proof of loss for your disability, insurers could deny your claim. Unfortunately, individual and employer-provided group plans have limits to what they cover. In some cases, these plans only offer coverage for specified conditions listed in a schedule of benefits.

Can You Ever Get off Disability Insurance?

We regularly review the long-term medical disabilities of people who receive a monthly benefit, which we call a continuing disability review. If the evidence shows that your condition has improved and you can return to work, your benefits may end.

What is Group Disability Insurance?

An employee who is disabled under group disability plans can receive up to 60% of their income before the condition, with a maximum specified amount, like $10,000 each month. This can help pay for both personal costs and business overhead protection.

What are the Differences Between Group Disability Insurance and Individual Disability Insurance?

If you have a group plan through your employer and switch jobs or are let go, your coverage doesn’t come with you. Additionally, the cost of group coverage can increase annually. However, individual policies tend to be more expensive initially but offer a more comprehensive range of benefit periods because each person is evaluated on their factors.

What is the Main Difference Between a Waiting Period and an Elimination period?

Waiting and elimination periods are used in insurance, particularly health and disability insurance. Regarding disability insurance, a waiting period and an elimination period are the same things, just different terms. Both are the time that must pass before an individual becomes eligible for coverage under an insurance policy.

Do you receive benefits for the elimination period?

Your long-term disability insurance policy carrier will not pay you long-term disability benefits during the elimination period. However, once the typical elimination period has concluded and you continue to meet the requirements for an inability to work, you will start receiving these benefits again.

Will my Disability Benefits Change When I Turn 65?

Your benefits automatically transfer to retirement benefits upon reaching full retirement age, but the amount will remain the same. If you are also receiving a reduced widow(er) ‘s benefit, please get in touch with Social Security as soon as possible so we can make any necessary adjustments to your monthly benefits.

How Can I Increase My Chances of Getting Disability Insurance?

  • The sooner you file your claim, the files or
  • You must make your appeal within 60 days
  • Provide complete medical information.
  • Gather documentation of medical treatments
  • Give medical proof
  • Outline your previous work experience

How Does Disability Insurance Protect You Financially?

Having disability awareness for insurance can help to cover the costs of a severe injury or illness so that you don’t have to worry about how you will pay your bills. Disability insurance is a financial safety net that provides a partial income if you cannot work due to sickness or injury. The long term disability coverage is a specific type of disability coverage that provides a more extended benefit period, typically two years or more.

What are the Three Sources of Disability Insurance Benefits?

Disability insurance (DI) is coverage that can protect you if you cannot work due to an injury or illness. Many employers, the Social Security Administration, or a private insurance company can offer DI policies. However, the amount someone pays in premiums often depends on their age and what they do for work.

How Much Money is Long-Term Disability Insurance?

The cost of long-term disability insurance will vary depending on factors such as age, health, occupation, and the amount of coverage you want. In general, the cost of long-term disability insurance is determined by your monthly benefit amount, the length of the benefit period, and the percentage of your income that the policy will replace. Most long-term disability insurance policies will replace 60 and 65 percent of your income.

For example, if you want a policy that will provide you with a monthly benefit of $4,000 for a benefit period of five years, and you want the policy to replace 60 percent of your income, the cost of the policy could be around $50 to $100 per month.

Next Steps

A long-term disability insurance policy can provide peace of mind and financial security if you cannot work due to an illness or injury. If you would like more information about this type of coverage or if you would like a quote, please get in touch with us.

Long-Term Disability Insurance Coverage

Request A Quote

Get help from a licensed financial professional. This service is free of charge.

Contact Us

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

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

Scroll to Top