You might think that an accident or illness causing a lengthy period of disability would never happen to you. You might also think that your medical insurance will cover all your expenses in the event of a major injury or debilitating disease. While the first assumption may or may not prove true, the second is flat out false. Your medical insurance may cover most of the actual medical expenses, but it will not pay your bills while you are out of work because of your disability. Additionally, the Council for Disability Awareness has concluded that 1 in 4 20 year-olds will become disabled before they retire. The Council also states that the average disability last 2.5 years. This is where your long-term disability (LTD) insurance can help.
What is Long-Term Disability?
Long-term policies provide you with an income when you are medically disabled for an extended period. Many people that have these policies get them through their employee benefits package at work. Depending on how the policy is written, LTD coverage usually will pay out 50-60 percent of your salary for the length of time stated in the policy. Some policies will pay out until you reach age 65 and also include a waiver of premium after 90 days.
Long-Term vs Short-Term
The major difference between short-term and long-term disability is time. Most of your short term policies will only pay out for 60-90 days after a 7-14 day waiting period. These are especially helpful when you have a 60-90 waiting period on your long-term disability. Short-term plans are helpful with pregnancies, off-the-job injuries, and heart disease. Long-Term plans are good for long-term or chronic conditions such as neuro-muscular diseases, connective tissue disorders, and some mental conditions. This is why you should consider having both policies. They will work in tandem to make sure you have the money you need while you are unable to work.
Returning to work
Most plan providers want you to get better and return to work. It is possible that you may be classified as partially disabled, which means you are able to work, but only in a lower paying job. In many cases, if you are only able to earn less than 20% of your previous income, you will still receive the full benefit stated in the policy based on your pre-disability income. If you are earning 20-80% of your pre-disability income, your stipend will be proportional with your current earnings. Finally, if you are able to earn more than 80% of your pre-disability income, most insurers will no longer consider you disabled, and thus you will no longer receive payments from the carrier.
If you have questions about disability plans or your group is looking for disability plans or other employee benefits, contact us to speak with a benefit consultant.