Long Term Disability Insurance (LTD) helps replace some of your income when you can’t work at all or can only work part-time because of a disability. Private companies that provide LTD policies have different enrollment requirements and benefits. LTD insurers publish summaries of the particular plans they offer.

Signing Up for Long Term Disability Insurance

How to Get LTD Insurance

Some people have LTD insurance through an employer, union, or other professional organization. This type of policy is known as group coverage. You can also purchase individual coverage directly from an insurance company/agent. If you have group coverage and leave your employer or professional association, you may be able to convert your group policy into an individual one.

Your Medical History and Pre-Existing Conditions

LTD providers consider your medical history when you sign up:

Individual Coverage: The insurance company decides what conditions might cause a disability in the future. These are called “potentially disabling conditions”. Some LTD insurers will not approve you for individual coverage if you have had treatment for a potentially disabling condition within a certain period of time. Treatment includes advice from a doctor and medication. The review of your medical history is known as medical underwriting.

Group Coverage: If you have had treatment for something within the past 3 to 6 months, you have a Pre-Existing Condition. LTD providers will still offer you Group Coverage if you have a pre-existing condition, however, there will be a set period of time when they won’t pay a benefit if this condition causes you to miss work. The period of time is generally 12 to 24 months and is called the pre-existing condition exclusionary period.

The Long Term Disability Benefit

When You Will Receive Your First LTD Check

Most LTD plans have a service wait, which is a set period of time before coverage actually begins. If you have a pre-existing condition exclusionary period, it starts after the service wait ends. When the service wait and exclusionary period are over, you are eligible for a benefit.

The date when this happens is called the coverage effective date.

Once you apply for a benefit, there is usually a waiting period (also called an “elimination period”) before you can begin to receive benefits. This waiting period generally lasts between 30 and 180 days. Shorter or longer waiting periods are available under some LTD policies. Usually, the longer the waiting period, the lower the premium will be.

The Benefit

Each policy has a different way of determining how much money you will receive. Some send you a set dollar amount. Other policies might take your pre-tax wages and give you a certain percentage of those wages. The pre-tax wages that insurance companies use to determine your benefit may include bonuses and other salary from the employer.

Most policies will subtract any benefit you receive from other programs like Workers’ Compensation, Social Security Disability Insurance, State Disability Insurance, or other programs that are designed to replace income.

Benefit Period

Benefit period defines how long LTD benefits will be paid. The most frequently offered periods are two years, five years or until you retire.

Differences and Options Among LTD Plans

Types of LTD insurance

There are two major types of individual long-term disability insurance:

1. Non-cancelable: under a non-cancelable policy, you have the extra security that premiums can never be raised above those shown in the policy. Also, the policy can not be cancelled as long as the required premiums are paid on time.
2. Guaranteed renewable: with a guaranteed renewable policy, the premiums can be raised, but only if the change affects an entire class of policyholders. For this reason, initial premiums for guaranteed renewable policies can be less expensive than non-cancelable policies.

Other less expensive policies with limited, if any, premium or renewability guarantees are also sometimes available.

Definition of Disability

LTD providers use two common definitions of “disability”:

1. Own Occupation or “Own Occ”: to be considered disabled you must be unable to perform your own occupation. Generally, you will get a benefit check for between two and five years.
2. Any Occupation or “Any Occ”: to be considered disabled you must be unable to work in any occupation. Generally, you will get a benefit check until you can go back to work or until the policy ends.

Part-Time Work

You may also be able to return to work part-time and still receive part of your LTD benefit check. Make sure to check the details of your plan before returning to work part-time.

Exclusions

Many policies will not cover disabilities caused by drug abuse, alcoholism, attempted suicide, war, or attempts to commit a crime