Long Term Disability Insurance Definition
A type of insurance that provides a steady income if you become too sick or injured to work. Long-term disability insurance will provide a monthly benefit for months, years or even the rest of your working years whether you become disabled suddenly from an accident or illness or slowly over time due to a degenerative condition. Long-term disability insurance has a waiting period, such as 90 or 180 days, before it begins to pay benefits. The longer the waiting period, the lower your premiums, but you must be able to afford your expenses on your own during the waiting period.
Disability insurance typically replaces 60% to 80% of your income, but your benefits are not taxed. Some policies provide coverage if you can’t work in your own occupation, but others only pay out if you can’t work in any occupation.
Example
Jax Teller gets hit by a careless driver one Saturday afternoon while he is enjoying a leisurely motorcycle ride (good thing he had motorcycle insurance but that is a definition for another time). He is in the hospital for a month, then has to recuperate at home for another six months. He has so many injuries and is in so much pain that he is unable to work at all during this entire time. Because he was prudent and purchased disability insurance long before his accident, Jax receives a monthly insurance payout that allows him to maintain the same comfortable standard of living he had before his accident so that he can recover in his home without the additional stress of not having an income.
Have more questions? Contact Us for more details on Long-Term Disability Insurance.
Tips From First Foundation
While health insurance would help with your medical bills if you became seriously ill or injured, it would do nothing to make up for the income you would lose while you couldn’t work. Without that income, it would be difficult to pay your medical bills, not to mention your living expenses for housing, groceries, utilities and so on. Disability insurance makes it possible to keep paying your bills, and possibly even keep saving toward goals like retirement and your children’s college educations, when you can’t work because of a serious illness or long-term disability.
Many employers offer disability insurance; you can also buy an individual policy instead of or in addition to a group policy to make sure you have enough coverage regardless of where you work. A non-cancelable and guaranteed renewable policy can provide additional peace of mind because the premiums won’t change during the policy term and the policy will remain in force as long as your pay your premiums, until it expires, often at age 65.