Long Term Disability Insurance: How It Works

Hey there, whether you’re suffering an injury or illness and trying to get back to
work, or you’re just getting started in your career path and thinking ahead, you need disability insurance. Long-term disability insurance protects the income of a disabled worker.

All employees should be offered this plan by their employer. It’s important to know what is available to you.

Read on to learn what the coverage is, how it works, why you should have it, and much more. 

What is long-term disability insurance, and why do you need it? 

Long-term disability insurance is a type of income protection that is designed to cover serious injuries and illnesses that keep you out of work for three months or longer. This includes permanent disabilities that leave you unable to return to work.

Disability is defined as being unable to perform with reasonable continuity the duties of your job as a result of sickness, injury, or pregnancy during the benefit waiting period and the first 24 months for which LTD benefits are payable.

During this period, you are considered partially disabled if you are working but unable to earn more than 80 percent of your indexed pre-disability earnings.

Long-term disability insurance is a smart investment for healthy, employed individuals who want to secure their financial future by protecting themselves from potential long-term injuries and illnesses.

You can get covered as a part of a group plan, or on your own. 

How does it work?

For the most part, long-term disability works just like any other type of

As the policyholder, you make recurring premium payments in return
for insurance coverage that helps with your income during a serious injury or

Each policy must show:

  • How much you are covered for, or how much long-term disability will pay you monthly if you become disabled. 
  • The waiting period, or the amount of time you must wait after a disabling event before your long-term disability benefits
  • The benefit period, or how long your long-term disability benefits will last if you become disabled.  
  • Types of disability covered, or what types of conditions your policy will cover and what it won’t cover. 
  • The premium, or how much disability insurance will cost you on a monthly and annual basis. 

Long term disabilities insurance cost

On average, you can expect long-term disability insurance to be between 1 percent and 4 percent of your current income.

But that’s just a ballpark estimate. How much you pay for long-term disability depends on several lifestyle and policy choices.

If you reside in WA: 13 Best Cheap Health Insurance in Washington (WA)

Cost increase with age

For a $4,300 monthly benefit that lasts five years: 

  •  A 40-year-old will pay $82 a month while a 45-year-old will pay $104 a month 
  • A 50-year-old will pay $129 a month while a 55-year-old will pay $167 a month 

Women pay more than men 

If women have disabilities that impact their careers, they need to make sure they have the right cover at the right price.

It’s not something many women think about, but it is something they should think about because even with all other factors being equal, women can pay up to 40% more in premiums than men for disability insurance.

That’s because women suffer disabilities that impact their careers more than men.

Disability claims for women also typically last longer than those for men. 

Do you pay back long-term disability benefits?

Most private disability insurance policies include an offset provision. This means a portion of the monthly premium will be used to pay back any future Social Security Disability Insurance benefits you may receive while covered under your policy.

You are allowed, by law, to collect both your monthly disability insurance checks from your insurer (offset) and your Social Security Disability Insurance check from the government (non-offset).

However, if you have a private long-term disability policy with an offset provision, it is also expected that you pay back some of these benefits in taxes.

This is because not all of the monthly premium is needed to pay for future benefits.

It’s used for administrative purposes as well. The amount you owe depends on how much money you made in a year before becoming disabled. If your income was $20,000 or less, there should be no offset balance owed to the government.

If it was more than $20,000 but less than $60,000, you might have an offset balance of up to 10 percent owed to the government at the end of each year.

Income over $60,000 could result in 20 percent owed to the government at the end of each year. What happens if I don’t pay my offset balance? If the Social Security Administration.

If you reside in Texas: 10 Best Cheap Health Insurance In Texas

The benefit period

How long will long-term disability benefits last depending on your policy’s benefit period? This is the amount of time your LTD benefits will last before you are eligible for Social Security benefits.

Some companies offer different benefit periods when you buy LTD online, including 2, 5, and 10 years or until you reach age 65 or 67. 

When do you start receiving your benefits?

Long-term disability coverage starts when you’re approved by the insurance company, you accept the offer to apply for coverage, and you begin paying your premiums.

When long-term disability benefits begin may not be so straightforward though. When applying for long-term disability coverage, your waiting period options typically include 30, 60, 90, 180, or 365 days. 

Long-term disabilities covered?

Disability insurance can protect you from the financial consequences of an injury or illness that prevents you from doing your normal job.

Many policies will pay a monthly benefit if you are unable to do your job for a prolonged period but able to perform other types of work.

If a policy says you don’t qualify for benefits unless you are “unable to do any kind of work,” it means that even if you can work in another type of job, you won’t receive benefits.

The disabilities include but are not limited to: 

  • Musculoskeletal disorders 
  • Cancer 
  • Pregnancy 
  • Mental health issues including depression and anxiety 
  • Injuries such as fractures, sprains, and strains of muscles and ligaments 

What is not covered under long-term disabilities insurance?

Don’t get surprised with a denial of your long-term disability claim after the five-month waiting period. It’s best to be fully aware of the exclusions and limitations in your plan to avoid any confusion or unpleasant surprises. 

Some common examples of exclusions that apply to all applicants include: 

  • Self-inflicted acts 
  • Criminal activities 
  • Acts of war 
  • Civil disobedience or rebellion 
  • Operating a motor vehicle while intoxicated 

Depending on your specific medical condition and lifestyle, you may be eligible to receive up to $5,000 per month. In the case of shorter-term disabilities (up to 24 months), a short-term disability could be a more appropriate type of insurance.

It can replace 20% to 50% of your income for up to 12 months if you are temporarily unable to return to work. One thing to keep in mind with a long-term disability is that it also protects if you develop a mental illness or nervous disorder that limits your ability to work.

So depending on your unique situation, long-term disability or long-term care may be more appropriate forms of coverage.

There is also something for the senior citizens: 10 Best Cheap Life Insurance for Seniors in 2023 

How to apply?

There are a lot of different ways you can go about purchasing long-term disability insurance including, buying in as part of a group plan through your employer, buying an individual policy directly from an insurance company, or even designing your policy and getting coverage tailored specifically to you. 

You may also find group coverage through: 

  • Unions 
  • Industry associations 
  • Membership organizations 

FAQs about Long term disability insurance

What is long term disability coverage insurance?

Long-term disability insurance provides income to workers whose earnings are interrupted by lengthy periods of disability. Benefits usually are payable until retirement, a specific age, or recovery from disability.

What is long term disability USA?

Long Term Disability (LTD) can be used following Short-Term Disability (STD) plans or alone. Long Term Disability coverage provides wage replacement that is between 50-70% percent of your earnings before a non-work related injury impacted your ability to work.

What is long term or permanent disability?

A permanent or long-term disability is an injury or illness that results in permanent impairment of routine activities, such as competing in the job market, for the rest of your life.


Just like anyone else, you are concerned about in the event of a long-term disability. The best way to protect yourself is by purchasing an LTD plan now.

You never know when an accident or injury can occur, but having a plan in place at this very moment is a good thing to have as it could mean the difference between financial ruin and maintaining your current standard of living.

Are you worried about what would happen to your family if you ever became disabled? It happens to 1 in 4 people! A serious accident or injury can occur at any time, anywhere.

If you wait until after you become disabled, it will be too
late to get covered. That’s why the worst thing you can do is assume “it can’t happen to me.” 


  • Metlife – disability insurance, long term 
  • Hr.edu – long term disability insurance 
  • State farm – Long term disability 
  • Meetbreeze – long term disability insurance 


Leave a Reply
You May Also Like