5 common long-term disability insurance myths, debunked

Colin Lalley 1600


Colin Lalley

Colin Lalley

Associate Content Director, Home & Auto Insurance

Colin Lalley is the associate content director of home and auto insurance at Policygenius, where he leads our property & casualty editorial teams. His insights have been featured in Inc. Magazine, Betterment, Chime, Credit Seasame, Zola, and the Council for Disability Awareness.

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Featured Image 5 common long-term disability insurance myths, debunked

There’s a lot of misinformation out there regarding long-term disability insurance. We’re here to set the record straight on five of the most common myths. And check out how we took down three other long-term disability misconceptions here.

"I don’t need long-term disability insurance coverage"

One of the most common myths about long-term disability insurance? That it’s not needed at all. Only a third of Americans have long-term disability insurance.

You might be thinking that you get enough protection elsewhere, but your own long-term disability insurance policy is needed for most people.

  • It’s different than workers comp. Some people think they can rely on workers comp to cover their expenses if they become disabled. It’s a nice safety net to have, but it’s not enough. According to the Council for Disability Awareness only around 5% of accidents or illnesses are workplace-related, which means that workers comp won’t even cover them.

  • It’s different than Social Security Disability Insurance. SSDI is a government program that provides a monthly stipend, based on past earnings, to people under age 65 who are disabled. While this sounds exactly like something you want your disability insurance to do, it can be hard to qualify for SSDI; you typically need to be completely disabled to qualify.

  • Your employer disability coverage isn’t good enough. We’ve said it before, and we’ll probably say it again: your employer-sponsored insurance coverage probably isn’t enough. You could end up taking home only 40% of your income through a group plan.

  • You shouldn’t bank on not getting disabled. It’s easy to think that you don’t need long-term disability insurance simply because you won’t be disabled during the course of your career. One in four people in their 20s will become disabled before they retire.

"I’m a government employee, I can’t get long-term disability insurance"

Many government employees are enrolled in retirement plans like the Federal Employees Retirement System (FERS). FERS enrollees can apply for disability retirement as long as you meet certain qualifications.If you participate in these programs, insurance carriers are limited in how much coverage they can offer. Generally, insurance companies such as Guardian consider government employees as having 40-60% of group plans, so while you can buy private supplemental long-term disability insurance in addition to having FERS benefits, you may not get as much coverage as you expected.

"The insurer won’t pay my claim!"

A big concern with insurance in general is that you’ll put all of this money into building your safety net, and when the time comes to actually use it, the insurer won’t pay out. There are a few things in particular about long-term disability insurance that make people wary.

Most of the time, claims are cut and dry: You lose your eyesight or you get cancer, can’t work, and receive disability payments. The horror stories of denied claims are complicated fringe cases, mostly revolving around mental illness.

That’s not to say that you won’t ever run into a particularly thorny situation, but don’t avoid long-term disability insurance because you think you won’t get what’s due. In nearly every situation, you will.

"I need long-term disability coverage until I retire"

When you purchase a long-term disability policy, you’ll need to choose how long your benefit period is – that is, how long you’ll be receiving the benefits. Typical long-term disability benefit periods are 2, 5, or 10 years, or until retirement.

In general, the longer the benefit period, the more expensive the long-term disability policy. That, combined with the fact that most disabilities only last three years, means that a policy with a benefit period that goes up until retirement can be unnecessarily expensive. A five-year policy will cover most cases, and can save you a lot of money in the long run.

"I have to get a non-cancelable policy so my rates don’t increase"

You don’t want your long-term disability insurance policy to ever be canceled. Confusingly, "non-cancelable" doesn’t really have to do with that. Instead, a non-cancelable policy means that your rate is guaranteed and won’t be raised over the life of the policy.

This is a nice feature to have, and many carriers offer it standard on their policies. If your policy doesn’t have this feature, don’t panic. It may not be worth paying extra to get, because the risk of a reprice on your policy is very low. There are strict regulatory processes to protect consumers against arbitrary rate hikes and rate changes. Going back to The Standard again: they’ve never raised their rates on policyholders, and they’ve been around since 1906. That’s how slim the chances are of you having your rates changed mid-policy.

You may not have long-term disability insurance yet, and if you don’t, don’t let any of these misconceptions scare you away from it. Get a free quote and talk to our experts to find out exactly how long-term disability insurance can work for you.Image: PhotoJeff