It’s important to be prepared in case you ever get seriously sick or injured, and thinking about it can be tough. But while the subject is nerve-wracking, being out of work with no support is scarier. This is where long term disability insurance comes in.
A long term disability policy covers a portion of your income when you become disabled and can’t return to work for years or even decades. Long term disability usually kicks in when a short term disability policy, which lasts three to six months, runs out.
Things to keep in mind when considering a long term disability policy:
- Eligibility. You’ll need to send income documentation to your insurer and perhaps take a medical exam to apply. You’ll know if you’re approved in a few weeks.
- Policy Type. An “any occupation” policy applies when you can’t work any job. An “own occupation” policy applies when you can’t work your regular job but can do another job. Benefits are easier to claim under own occupation disability.
- Elimination Period. The time before long term disability applies can be 30 days to a year. Longer elimination periods are more affordable, but they could leave you without coverage longer.
- Cost. A long term disability policy usually costs between 1% to 3% of your annual salary.
- Coverage Amount. The closer this amount is to your usual take-home pay, the better! A monthly benefit of 60% of your monthly salary is considered the sweet spot.
- Benefit Period. Some plans pay for a few years, but others last until retirement age. A longer benefit period means you’ll stay covered from the end of your disability benefits to the start of your retirement benefits.
Content by Lockton Dunning Benefits with info from https://www.policygenius.com/disability-insurance/learn/how-does-long-term-disability-insurance-work/