Long Term Disability Basics

Learn the Basics of Long Term Disability Insurance

Person navigating a wheelchair
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The Council for Disability Awareness reports that the average long-term disability absence is 34.6 months. The council states that accidents are not the cause of most disabilities. Musculoskeletal injuries, pregnancies, cancer, heart disease, and other illnesses are the main culprits—not work-related injuries.​

Some employers offer a long-term disability insurance plan for their employees, to protect them and ensure they can return to work in a reasonable amount of time. Long-term disability can cover you until you reach retirement age. However, this is dependant upon the plan you have.

Long-Term Disability Insurance

Long-term disability insurance covers a portion of your income (around 50-70%) when you have become injured or seriously ill. Long-term disability is different from worker's compensation in that it is not for work-related injuries or illnesses.

When an employee cannot work for an extended period of time, a long-term disability plan can help cover a portion of their salary. Long-term disability usually starts after a short-term disability policy has run out. This happens around 10 to 53 weeks after an eligible event, with an average time of around 26 weeks.

Coverage Terms and Responsibilities

Disability insurance is generally one of the more important parts of a benefits package. Some companies opt to only provide short-term disability, others don't (or can't afford to) offer one at all. Long-term disability is not a requirement in any state.

Many employers offer long-term disability programs funded through a third-party administrator such as an insurance agency. Employers can choose how much coverage to elect for their employees.

The duration of benefits are varied—some plans pay three to 10 years' worth of disability, while others may pay until age 65 based on a rate schedule. It depends on the choices the employer has made.

Employees filing for disability can only qualify for coverage under certain terms. The main terms are listed below:

  • Employees usually need to work for the employer for a certain amount of time before coverage kicks in
  • Employees need to work full-time, usually 30 hours or more a week
  • Employees need to elect their benefits and be contributing to the plan

Long-term disability benefits are not limited to monetary assistance. Larger companies can afford different options. Some provide occupational re-training to assist those who cannot perform their job anymore. Others are more restrictive, having clauses that prevent disability insurance for pre-existing conditions.

Premium Payments

Premiums are the amount paid regularly to an insurance plan. Years ago, many companies paid premiums for long-term disability. Employers have switched to extending different options to employees for payment of premiums. Depending on which option is chosen, there may be different costs and tax implications. Options include:

  • Employer-paid premiums
  • Employee paid premiums
  • Shared cost plan

Personal Long-Term Disability Insurance

Small business owners may not be able to provide disability insurance for their employees. If this is the case, for you as an employer, you might consider providing information for your team members to educate them on the importance of disability insurance. You could furnish some insurance providers' information (brochures, website information) for your employees' reference.

As an employee, you may want to consider looking into personal disability insurance. If your employer does not offer any programs, look to your current insurance provider to see if they offer disability insurance. You can also shop around for the coverage you think is right for you.