3 long-term disability insurance myths busted

Posted by on May 29, 2013

shrek-disability-insurance-PolicyGenius

Photo credit: tapeciak.net

Oh, long-term disability insurance. You're scaring off everyone! You do the right thing, but are so unpopular that nobody knows about it. Underneath that intimidating exterior is something valuable and good. You, long-term disability, are the Shrek of personal insurance.

You see, like Shrek (or the Beast or any other don't-judge-a-book-by-its-cover character), long-term disability insurance is scary because it's misunderstood. For example, people hold onto the myth that disability is a low-probability catastrophe from a high-risk activity, like getting paralyzed in a skiing accident. But the fact is our risk of disability is twice as high as our risk of early death. And most disabilities are caused by illnesses, not accidents. Boom. Facts. And these myths and misconceptions are a key reason why you probably don't have disability insurance.  So, in honor of disability insurance awareness month (May, in case you didn't know), I'm going to do disability insurance a favor and fact-bomb other myths below:

Myth 1: I can rely on some government safety net if I can't work

Facts: It's tougher to qualify for Social Security disability insurance (SSDI) than it is to get into some top colleges! Only 35% of initial Social Security Disability insurance claim applications were accepted in 2012 (compare: the acceptance rate at the University of Michigan is 40%). And if you do qualify, the average SSDI payment is just $1,130 a month.

What about workers' compensation? It won't cover you in most cases, since 95% of accidents and illnesses are non-work related.

If you can do it, you're much better off creating your own safety net.

ltd-guide-ad@2x

Myth 2: I have long-term disability insurance through work so I'm covered

Facts: You're in the fortunate minority! Only 47% of employers offer disability insurance. But, you might not be as covered as you think you are. A few things to keep in mind:

  • Generally, long-term disability insurance through work is paid with before-tax dollars. This means benefits are taxable, which effectively lowers the payout to you when you're disabled.   
  • Long-term disability insurance through work generally has more limited coverage than a policy you buy on your own. Some policies may stop payments completely if you're capable of returning to some form of work. They also generally limit the benefit period, sometimes to as little as 2 years.
  • If you change jobs, you can't take your long-term disability insurance with you. And if your new employer does not offer disability insurance, you'll need to purchase it on your own. This can be difficult to do as you get older.

Purchasing an individual long-term disability policy will provide you tax-free benefits with features that match your needs. And you keep it for as long as you need it. Supplementing what you already get from work could be a smart move.

Myth 3: Long-term disability insurance only kicks in when I'm not working

Facts: Actually, many long-term disability insurance policies pay benefits even when you're working. Some policies pay so-called "residual" benefits if you're only partially disabled (i.e., can only work part-time due to your health condition).  Some policies also pay benefits when you're working in a different occupation because you're unable to work in your regular occupation.

PolicyGenius long term disability quotes

There is more to long-term disability insurance than you think

Long-term disability insurance protects your most important asset - your income. So it's worth the time to separate facts from myths.

Got any other questions about long-term disability insurance (or any other type of insurance)?  Let us know at team@policygenius.com

Get more shopping advice and tips

Join our mailing list and we'll let you know when we publish more great insurance advice and other expert content.




  • Pingback: KnowItOwl Insurance Insurance feels good (especially when you don't)

  • Pingback: Insurance feels good (especially when you don't) | PolicyGenius

  • Pingback: The real reason why you need health insurance | PolicyGenius

  • ANGELA CARROLL

    LOVE THE INFORMATION!!!

    • http://www.policygenius.com/ Francois de Lame

      Thanks Angela – glad you found the information useful. If you ever have any questions, or topics you’d like us to blog about, feel free to let me know

  • Sharlabel

    I have a pre-existing condition that excludes me from long term disability insurance. A local agent I spoke with said he would try to just have the condition (Spontaneous artery dissection, which puts me at risk for a stroke) excluded. That would be fine with me. The company, however would still not cover me. Are you familiar with a situation like this or perhaps a company that would cover me with this condition excluded?

    Sharlabel

    • http://www.policygenius.com/ Francois de Lame

      When it comes to offering disability insurance to someone with a preexisting condition insurers evaluate on a case-by-case basis. Typically, insurers willing to offer coverage will exclude the condition from the policy. This exclusion might last the lifetime of the policy or for a set number of years. When evaluating your options it’s important to work with an insurance professional that works with a number of insurers. They’ll be able to present your case and find someone that would be willing to provide coverage. Though this is never guaranteed.

      In your case Fidelity Securities and Assurity are two companies that would consider covering you. While Principal are not willing to provide coverage.