What to expect from LTD insurance

Purchase a policy

    Buy a policy for a benefit amount that would cover you if you’re out of work for an extended length of time. Remember that if you buy your own policy, the benefits aren’t taxed, so a policy that pays out 60% of your gross income would effectively replace most of your take-home paycheck.

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Pay your monthly premium

    Generally, you can expect to pay between 2–4% of your gross income in annual premiums. That means someone earning $60,000 per year would probably pay between $100 and $200 a month to protect their income.

    The premium depends on several factors, including age, gender, occupation and policy features. So you’ll have to get personalized quotes from insurance companies (which PolicyGenius can do for you).

    If you’re young and plan to keep your policy for a long time, get a policy that’s non-cancelable to the age of 67. This locks in your premiums at their current level as long as you pay them on time.

Get sick or injured & become unable to work

    What qualifies as a “disability” depends on how your policy defines it. This is where it gets a little complicated, but bear with us.

    If you work in a specialized field (for example, you're a physician or software programmer), or you have a high income, you should get what’s called an “own occupation” policy. That policy defines a disability as the inability to work at your regular occupation, even if you still might be able to work at another occupation. For example, a surgeon with hand tremors who takes a job as a medical school lecturer would be eligible for benefits under an “own occupation” policy because he can’t perform the duties of his own occupation (surgery).

    The other option is an “any occupation” policy. To qualify as disabled under this policy, you must be unable to work at any occupation. This is a harder policy to claim benefits from, but it’s also usually less expensive than an “own occupation” policy.

    Bottom line: if you can afford an “own occupation” policy, that’s what you should get.

File a successful claim

    As with any insurance policy, when something happens, you’ll need to file a claim. Insurance companies are on the lookout for fraud or wrongful claims, so correctly filing a claim is important. An LTD claim will generally require information about your job and information about your diagnosis (usually statements and documents from your physician). The insurance company will review the claim and either approve it, request more information, or deny it as appropriate.

Wait out the elimination period

    All LTD policies have an elimination or waiting period. It is the period between the time that a disability begins and the point when benefit payments start. The claimant must remain disabled during this period and beyond. This is to eliminate shorter-term conditions from coverage. Most commonly, these periods are 30, 60 or 90 days. Waiting periods of 180 and 365 days are also available.

    The longer the elimination period, the lower the premiums on the policy. Remember you’ll have to get by on your own savings during the elimination period, so choose a period you can afford.

Receive your LTD insurance benefits

    Once a claim is approved and you’ve waited out the elimination period, you’ll start receiving your monthly benefit for as long as your disability lasts, for up to the defined “benefit period.” Typically, most companies provide benefit periods between 2 and 10 years. In addition, you can get a benefit period that lasts until retirement age (when Social Security benefits would take over). The longer the benefit period, the higher the premium.

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Return to work when you are able

    If you can fully return to your regular occupation, then your disability payments end. If you can return to your regular occupation but with some limitation, or can only work in a different occupation, you might still collect benefits, depending on the policy (remember the “any” vs. “own” occupation coverage distinction) and the riders you’ve purchased (like the residual benefits rider, which compensates for a loss in income due to your disability).

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