Long-term disability insurance is designed to help cover your living expenses should you become disabled. However, the insurance company does not start paying out benefits immediately if you become seriously ill or injured. You must meet a specific definition of disability for a certain period of time (typically 90 to 180 days) before your benefits start. This period of time is known as the waiting period or elimination period.
How is Disability Defined for Long-Term Disability Purposes?
The definition of disability is covered in your long-term disability insurance policy and will depend on the type of policy you have. The two basic types of long-term disability insurance are:
- Own occupation: In this type of policy, disability is defined as the inability to work in your regular occupation. You should be eligible for benefits even if you are able to perform some other type of job.
- Any occupation: Disability in this case is defined as the inability to work in any occupation. To qualify for benefits, you must prove you are unable to work in any type of job.
What Do You Do During the Waiting Period If You Become Disabled?
Many people opt to have both short-term disability and long-term disability insurance. If you have both, you can receive short-term disability benefits during most of your long-term disability waiting period. Typically, the waiting period for short-term disability is only seven to fourteen days, and the benefits last for the entire long-term disability waiting period. When short-term disability benefits expire, people who have both types of policies are usually able to transition to long-term disability benefits.
How Much Does Long-Term Disability Insurance Cost?
Long-term disability rates can depend on various factors, including your age, health, and occupation, and they can vary significantly from one provider to another. Our experienced agent can help you find the insurance you need at the lowest available premiums.
Generally, the cost will be approximately 1% to 3% of your annual salary. If, for example, your annual salary is $50,000, your yearly cost for long-term disability insurance could run between $500 and $1,500, and your monthly payments could run between $60 and $125.
Factors Affecting the Cost of Long-Term Disability Insurance
In addition to age, health, and occupation, several factors affect long-term disability premiums, including:
- Coverage amount: The higher your benefits, the higher your premiums. Long-term disability benefits are tax-free. As a general rule of thumb, set your coverage at 60% of your pre-tax salary.
- Benefit period: The longer you want to receive long-term disability benefits, the more your policy will cost. As most long-term disabilities last for several years, a benefit period of five years minimum may be a good choice.
- Waiting period: The shorter your waiting period, the more expensive your long-term disability insurance will be. A short-term disability policy can make it possible to opt for a longer waiting period so you can save money on your long-term disability premiums.
Consult with our friendly, knowledgeable agent about your long-term disability insurance options.