Concerns about disability might not be at the forefront of your thoughts regarding insurance coverage, but statistics from the Social Security Administration indicate that 20-year-old workers face a 25% chance of developing a disability before reaching retirement age.
A potential financial safeguard in such situations is long-term disability insurance. This type of coverage proves beneficial if you experience a disability that hinders your ability to work or perform at your previous capacity.
Long-term disability policies are often offered by employers, or individuals can opt for individual policies. If you are considering obtaining your own policy, a reliable starting point is to explore the offerings of the top long-term disability insurance companies.
Best Long-Term Disability Insurance Companies
- Mutual of Omaha: Best Overall
- MassMutual: Best for Retirement After a Disability
- Ameritas: Best for Discounts
- Assurity: Great for Riders
- Principal: Great for Quick Coverage
What Is Long-Term Disability Insurance?
Long-term disability coverage is disability insurance that pays a portion of your lost wages if you’re injured or become ill and can no longer do your job. Long-term disability payments may be available for many years—for example, five or 10 years—depending on the policy.
If you’re buying an individual disability insurance policy (as opposed to one through a workplace), you’ll choose the benefit length, which is the number of years that you can receive benefit payments or the age limit for coverage, such as coverage to age 65.
Long-term disability insurance is a benefit often offered by employers, but you can also buy an individual disability insurance policy on your own. That’s different from short-term disability insurance, which is typically only offered by employers and is for a smaller period if you become disabled. It’s much more difficult to find a short-term policy on your own compared to a long-term disability policy.
Long-term disability insurance is also different from Social Security Disability Insurance (SSDI). SSDI, often referred to as “going on disability,” is offered through the government if you can’t work and you’ve contributed to Social Security.
What’s the Difference Between Total and Partial Long-Term Disability Insurance?
Total long-term disability insurance pays you if you can’t work at all regardless of the job because of an injury or illness. Partial long-term disability pays you if you’re able to work but not at your previously full ability.
How Does Long-Term Disability Insurance Work?
You have to file a claim documenting your illness or injury and wait for approval from the insurance company to qualify for long-term disability benefits. Once approved, long-term disability insurance pays a percentage of your wages after the elimination period is over, up to the end of your coverage period. Payments are usually made monthly.
When you buy an individual long-term disability policy, you select the elimination period, or waiting period, which is the time between when you’re unable to work and when disability payments begin. Elimination periods may end as little as 30 days after the disability or as long as a year or two, depending on the company and policy.
Longer elimination periods generally mean cheaper premiums, but you sacrifice prompt disability payments.
Long-term disability insurance typically pays 40% to 65% of your pre-disability earnings, up to a maximum amount, but you can find policies that pay up to 80%.
What Does Long-Term Disability Insurance Cover?
Long-term disability insurance can cover disabilities caused by a range of injuries and medical conditions. These can include:
- Brain injuries.
- Kidney disease.
- Heart attack, stroke, heart disease and other circulatory issues.
- Mental health issues, such as anxiety, bipolar disorder and depression.
- Musculoskeletal disorders, such as chronic neck and back pain, ruptured discs and rheumatoid arthritis.
An insurance policy’s definition of a disability is something you want to understand when buying a policy. That definition may influence whether you receive disability payments based on your issue. It’s important to note that insurance companies will also consider how your injuries or medical conditions affect your ability to work when reviewing claims.