Long Term Disability Insurance

Long Term Disability Insurance Overview

Long Term Disability Insurance is insurance that replaces a significant portion of your income in the event you cannot work for an extended period of time. It doesn’t apply to any medical fallout from injuries sustained while on the job as these would be covered by workers’ compensation insurance.

According to Balance Careers, long term disability insurance protects a family in the event of a personally devastating illness or accident that causes symptoms or injuries preventing work for an average of about two and a half years. An employee has a one in five chance of becoming disabled over the life of his or her career.

How Short Term Disability and Long Term Disability Insurance Work Together

Long term disability benefits do not kick in until short term disability benefits have been exhausted. The first step in getting benefits issued is to apply for short term disability which can last three to six months. When the short term disability is nearing its end date, the employee must then apply for long term benefits, which typically replace at least half to three-quarters of their income.

When reviewing a potential employer’s benefit plan, it’s important to note the length of time that long term benefits can be collected. Some plans allow for an additional two to ten years beyond the short term payout, while other plans permit the employee to be paid until age 65, with condition accountability.

It never hurts to supplement an employer-based plan with additional insurance purchased by the individual. This can be expensive, but many employers with limited disability plans have relationships with insurers so the employees can buy supplemental plans.

As a hidden perk with supplemental policies—notes insure.com—premiums paid by individuals with after tax monies will result in a tax-free benefit payout. The opposite is true with employer-paid benefit plans.

Insurance Company Blues

Realizing that insurance companies have a vested interest in seeing you healthy and productive and back on the job, securing adequate long term disability benefits may be more difficult than you imagine. Insurance companies are businesses and are primarily interested in the bottom line.

You may have to jump through many hoops to prove your disability if it is all-encompassing. It is not uncommon to have long term benefits denied after exhausting short term benefits. Often denials are based on the review of in-house physicians that may not have ever examined or laid eyes on the worker. Maintaining regular appointments with personal physicians and specialists, ensuring independent documentation, is imperative.

Fortunately, the Employee Retirement Income Act (ERISA) of 1974—according to the U.S. Department of Labor—established that employer-based insurers must publish administrative plan information including the grievance and appeal processes for policy-holders. ERISA also provides legal recourse should all internal methods for addressing insurance company issues fail.

Even if you are not denied, long term benefits payout may come with the expectation that—if possible—you work a different kind of job. Perhaps you are able to work a desk job in lieu of a more physical one. In this capacity, if you are able to earn 20 to 80 percent of your former wages, your benefit payments will be a proportional amount based upon what you could earn rather than the policy-specified percentage.