Commonly Asked Questions About Long Term Disability
In general, its best to have enough disability coverage to replace 60% of your after-tax income. However, this number can vary on a number of factors, such as recurrent debt payments and monthly living expenses.
Use our Disability Insurance Coverage Calculator to find out how much coverage is right for you.
The length of time you can receive benefits depends on your policys Maximum Benefit Period, which is determined by your employer. Once the elimination period is satisfied and you continue to meet the definition of disability, your Long Term Disability Insurance benefits can extend through the Maximum Benefit Period.
The disability benefit may be reduced if you are receiving income from other insurance policies, retirement or government programs.
Offer With Temporary Disability Plan
The Temporary Disability Plan provides financial protection for up to 90 days for employees with a short-term sickness or injury. When offered together with the Long-Term Disability Plan, employees have comprehensive financial protection plus a seamless administrative experience if they transition from one plan to the other.
How Does The Insurance Company Calculate Pre
Again, it depends on the long-term disability policy. The policy will specify how the insurance companies calculate pre-disability earnings. These earnings will include wages and salary. However, it may or may not include bonuses, commissions, etc.
Our experienced disability lawyers can review the policy and discuss with you how your pre-disability earnings will be calculated.
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How Much Does Long Term Disability Insurance Pay
Your policyâs benefit amount determines how much you will receive in long term disability benefits if you become disabled.
In most cases, your benefit amount will be a percentage of your income. The size of your disability insurance benefit amount will depend on the policy. Generally, long term disability policies can replace anywhere from 60 percent to 80 percent of your income.
In addition, many policies replace the income that is lost if you have to take a lower-paying job due to an injury or illness.
How Long Does Long
Even after coverage is approved, your long-term disability insurance benefits wont kick in until youve satisfied the waiting period requirement. For most policies, this is at least 30 days, though it can easily be 60, 120, 365, or even 720 days.
Once benefits start, they will continue until your predetermined benefits limit is reached. This is the period of time you chose when you purchased the policy, and can last for a specific number of years or through retirement. The longer the benefits period, the more youll pay in premiums for your coverage.
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Factors That May Affect The Price Of Monthly Insurance Premiums
Some policyholders have access to a group long-term disability policy through their employer. Group policies tend to offer less expensive premiums. Additionally, certain employers may pay a portion of their staffs premiums, or cover the entire amount. Doing so might greatly reduce the cost of this type of policy.
If you are self-employed or do not have access to a group long-term disability benefits through your employer, you may be able to access a group coverage plan through your labor union or other occupational organization. Alternatively, you may choose to purchase your own individual policy, which may affect the cost of your monthly premium.
Can You Still Earn An Income
Depending on the type of policy you have, you may be able to purchase less coverage, meaning your long-term disability insurance will pay you less when you become disabled. Thatâs possible if you have an own-occupation long-term disability insurance policy, which means that you only need to be so disabled that you canât work at your current or most recent job. Own-occupation policies are more expensive because they that have a higher likelihood of paying out however, youâll be able to work another job that youâre qualified for and still get paid disability benefits.
The opposite of an own-occupation policy is an any-occupation policy. This type of policy pays disability benefits only if you canât work at any job. This is a much stricter definition of disability to meet, so any-occupation policies have lower premiums, but may not offer the amount of coverage you need.
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Offsets And Integration Of Benefits
Its common for insurance companies to reduce your disability benefit if you get other payments. In other words, they offset their payment usually dollar-for-dollar. For example, lets say you get a CPP disability payment of $900 per month. In this case, your insurance company reduces their payment by $900 per month.
Other offsets include money you get from workers compensation, personal injury settlements, severance payments, or CERB payments, to name a few.
To read more about the steps you can take when your insurer has overpaid you, read our article: LTD Overpayment because of CPP Disability Retroactive Payment: What are my options?
Can My Long Term Disability Insurance Company Force Me To Apply For Canadian Pension Plan Disability Or Other Benefits
Many policies contain provisions that allow the insurance company the power to make you apply for benefits from another source. If you apply and are denied benefits you may be required to appeal the decision. Consult your insurance policy or speak to an insurance representative to see what applies to you and your policy.
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Cost Of Living Adjustment
If you’ve been approved for benefits, you can expect your benefits to increase 1% to 3% each year if your policy contains a cost-of-living adjustment . The COLA may be part of your basic coverage or offered as an optional rider, and it is usually indexed to a well-known measure of inflation, such as the Consumer Price Index .
What Does Long Term Disability Insurance Cover
Here are the top five reasons for filing long term disability claims:
As you can see, the scope of disabling events is wide. That’s why perhaps the most important factor when considering long term disability insurance is a policy’s definition of disability.
How a policy defines disability will determine how much, and even if, you collect benefits following an injury or illness. Some policies will pay out a monthly benefit if an injury prevents you from working at your normal job, but allows you to do other types of work that will nonetheless reduce your income. Other policies will not pay benefits if you are able to work in another type of profession, even if you earn less money.
A policyâs definition of disability is based on your capacity to work. Maybe youâre unable to work in your chosen profession, but can do other work. A disability may allow you to work in a reduced capacity. Serious ailments can prevent you from working in any job.
To collect on a claim, you must meet the policyâs definition of disability. This can vary greatly by company and policy. The broader the definition, the more it will cost.
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Should I Get Long Term Disability
If you earn an income, you should strongly consider purchasing a long term disability insurance. This is especially true under the following circumstances:
- You have dependents who rely on you financially, such as a spouse, kids, or aging parents.
- You have debt that you need to pay off, such as student loans or a mortgage.
- You have a high-paying job occupation that is not easily replaceable .
- You are self-employed .
- You have a technical job occupation that requires skills that couldn’t be performed if disabled.
Other types of coverage exist to help people through periods of disability, such as short term disability insurance, workers’ compensation insurance, and Social Security Disability Insurance . However, only long term disability insurance will cover the following circumstances:
- Disabilities that occur outside of work
- Disabilities that last longer than a few months.
- Disabilities that are serious enough to prevent you from working your regular job, but still allow you to work in other capacities
- Individuals who earn well above what SSDI pays in monthly benefits
It’s pretty clear why long term disability insurance is such a valuable component of your financial safety net. But is it the cost of long term disability insurance actually worth it?
Why Has My Long Term Disability Claim Been Denied Why Have My Long Term Disability Benefits Been Terminated
An insurance company may deny your long term disability claim or terminate your long term disability benefits for a variety of reasons. Some of these might have a simple solution, such as making sure that they have all the necessary forms and documentation, but in other cases it might require the assistance of a lawyer to help you in your claim against the insurer in order to get the benefits that you are entitled to.
Issues may arise if you are not examined by insurance company approved doctors, you exceeded the time limitation in submitting a claim, there was a misrepresentation on the application as you had a pre-existing condition that you did not mention, there is surveillance evidence that contradicts your claim, there was a failure to have your injury or condition properly documented by your physician, you have not mitigated your losses by maintaining your treatment regimen, or there was a failure of your employer to provide the necessary documentation.
Similarly, insurance companies may argue that you do not have a claim or that you are partially or residually disabled . Instead, you are able to work part-time or with modified tasks. It may also consider your loss of earnings as a result of the medical condition. However, the benefits you would receive would be less than if you were receiving long term disability benefits.
Watch these videos explaining the top 10 reasons why an insurance company might deny your long term disability claim :
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Best For Rider Options: Mutual Of Omaha
Mutual_of_Omaha
If youre looking for long-term disability insurance that lets you really customize your policy and keep coverage for as long as possible, Mutual of Omaha may have what you need. They are our top choice for best policy rider options, allowing you to choose between features like future insurability, critical illness coverage, and return of premium, to name a few.
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Up to $12,000 per month in benefits
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Premiums stay level through age 67
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Many built-in policy benefits
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Multiple additional riders to choose from
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Shortest elimination period is 60 days
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Coverage can be continued through age 70, but premiums will increase
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Quotes not available online
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Policies must be purchased through an agent
Providing insurance coverage since 1909, Mutual of Omaha has become a trusted name throughout the United States. They hold an A+ financial strength rating from AM Best and are a Fortune 500 company with nearly 12 million members.
With this long-term policy, youll enjoy a plethora of built-in benefits that include total presumptive disability, waiver of premium, recurrent disability, transplant donor benefits, rehabilitation benefits, and a survivor benefit. If you want or need more, you can also add a critical illness rider, future insurability option, accidental medical expense benefits rider, or return of premium benefits rider, thus earning Mutual of Omaha our nod as best for rider options.
How To Calculate The Ideal Benefit Amount
Before you start shopping for a long-term disability policy, itâs worth taking a look at your budget to figure out exactly how much you would need every month if you lost your job due to a disability. Remember, you not only need enough to keep the lights on but also to cover any medical bills resulting from your disability that your health insurance doesnât cover. The 60% to 80% figure will roughly equal your take-home pay because, unlike your salary, the benefit amount is not taxed as income.
An agent at Policygenius can make it easy to determine how much disability insurance you need. But, first, compare long-term disability insurance policies online to find a quote that fits your budget.
Takeaway
Here are a few things to keep in mind when calculating your ideal benefit amount:
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Cost Of Disability Insurance By Benefit Period
You can choose the length of time a disability policy pays benefits. The longer you receive payments, the more you pay in premium. Some policies will pay a monthly benefit for a pre-established period, such as 10 years. Others will pay until you reach a certain age, typically 65. A few insurance companies have an option that pays lifetime benefits if the insured remains disabled for life.
Hereâs an example of how much your benefit period will impact your premium. These rates are for a 45-year-old male professional worker earning $75,000 a year. This applicant is opting for a $3,800 monthly benefit. The monthly premium rates quoted are:
- 1-year benefit period: $46
The longer your benefit period is, the higher your premiums will be.
Cover Your Fixed Expenses
Mortgages, electricity, internet, food, health and life insurance premiums, etc. There are certain fixed expenses that you pretty much know you need to cover every month. Itâs hard to say exactly how much of your income you use on fixed expenses â itâs different for everyone, obviously â but if you havenât already, you should figure out this number, give or take a few hundred bucks. Use this as your baseline benefit amount that any LTDI policy needs to meet.
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How Long Do I Have To Wait To Collect Long Term Disability Benefits
Once you have made a claim how long you have to wait in order to collect your disability benefits depends on your policy as your claim must be evaluated, approved and a mandatory waiting period must be completed. If your employer has a Short Term Disability plan the waiting period to access the benefits under your plan is usually within 5 days.For long term disability benefits, you will need to be off of work for several months before you can collect benefits. This waiting period is called an elimination or qualifying period and it can range from 90 to 180 days. Consult your policy and your employer for clarification.
There are alternatives if you do not have access to a short term disability plan. Instead you may qualify for Employment Insurance or Sickness Benefits through the Government of Canada. This can provide up to 15 weeks of sick benefits.
If You Are Getting Other Benefits
If you get both a CPP survivor’s pension and a disability benefit, they will be combined into a single monthly payment. The total amount you get cannot be greater than $1,413.66 per month .
If you are receiving both a retirement and survivor pension, and are then granted a post-retirement disability benefit, you will receive the higher amount of the survivor or post-retirement disability benefit flat rate.
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Does Long Term Disability Continue After Termination & Insights
Long term disability insurance that you purchase through a private insurer is not tied to a particular job and will continue even if you lose your job. If you have group disability insurance offered through your employer then your coverage can be terminated if your job is terminated.
If you still have questions about direct to consumer individual long term disability insurance, Guardian Direct is here to help. We have a library of resources that will help you understand the different types of long term disability insurance and get insights, and advice from insurance professionals to help you figure out how much Long term disability insurance coverage you need to help protect yourself and your family.
What If Your Ideal Benefit Amount Is Too Expensive
In some cases, it may be prohibitively expensive â i.e., you canât afford the monthly or annual premiums â to get your ideal benefit amount. This typically happens if you work in a risky occupation or have had prior health issues.
There are some things you can do to help make your long-term disability insurance policy more affordable. For starters, you can try reducing your benefit period. The benefit period is the amount of time youâll receive benefits. The longest benefit period you can get is up to your retirement age . But you can save money by reducing this your benefit period to just 10, five, or two years.
You can also try increasing your elimination period. The elimination period is the period of time between when your disability starts and when your insurance company starts paying out benefits. More expensive policies have elimination periods of either 30 or 60 days. You can save a little bit of money by switching to a 90-day elimination period without affecting how much your LTDI policy pays.
However, if you donât have enough emergency savings to cover the six months between when you stop receiving a paycheck and when your insurance policy kicks in, a long elimination period can be disastrous. If you choose this option, make sure youâre covered either by emergency savings or a short-term disability policy.. If neither of these options lowers your premium enough, youâll need to reduce your monthly benefit amount.
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How Long Does Long Term Disability Insurance Last
Long term disability coverage lasts as long as you make your premium payments on-time and in-full. Simple as that.
However, itâs important to note that long term disability benefits may not last forever if you do need to receive them.
How long your long term disability benefits will last depends on your policyâs benefit period. The benefit period may be a certain number of months or years, or up to a certain age. Typically, benefit period options for long term disability insurance policies include 2, 5, or 10 years, or until ages 65 or 67.