Long-term disability insurance is coverage intended to protect your income if you are unable to work due to illness or injury. While short-term disability insurance usually lasts a maximum of two years, long-term coverage can often last five or 10 years, if not all the way through to your retirement.
The average individual disability claim lasts over 34 months or nearly three years. If you are unable to work (or make your usual income) during that time, you could find yourself in financial hot water. With the right long-term disability insurance, though, your income would be supported for years at a time.
You would be able to better manage your usual expenses, even if out of work for an extended time period.
Should You Get Long-Term Disability Insurance?
No one expects to find themselves disabled. Unfortunately, it happens often and can impact you for weeks, months, or even years at a time. Having disability insurance coverage to call upon could make or break your household budget.
More than half of American households admit to living paycheck-to-paycheck.6 If that income were to suddenly disappear due to an unexpected disability, would you still be able to manage the expenses out of pocket? Could you do it for six months, or even longer?If not, you’re definitely not alone.
Let’s say your household expenses total $4,000 per month; over the course of six months, that’s $24,000 that you’d need to have in emergency savings just to stay afloat. With long-term disability insurance, though, a percentage of your income would be protected, allowing you to heal, recover, and still pay your bills at the same time.
If you have the emergency savings on-hand to keep your family afloat during an unexpected illness or injury, long-term disability might not be necessary. However, if you worry that you would run out of savings—or are currently unprepared for such a burden—it’s worth considering a policy.
What Is Considered a Long-Term Disability?
A long-term disability is an injury, illness, or medical condition preventing someone from working their usual job, at their usual pace, or making their usual income.You might be surprised to learn that approximately 90% of long-term disabilities today are the result of an illness, not an accident or injury.
This puts disability in the realm of possibility for any of us, no matter how young, healthy, or seemingly safe. Long-term disabilities could include cancer, neurological or joint disorders, and asthma, to name a few. They could also include injuries, like those due to a fall or even a car accident.
If you have long-term disability coverage, it can protect your income for years, though you will need to wait until the end of your elimination period to begin receiving funds. This is why some people also carry short-term disability insurance; these policies can have waiting periods as short as zero days, helping bridge the gap for you and your bank account.
How Long Does Long-Term Disability Last?
Even after coverage is approved, your long-term disability insurance benefits won’t kick in until you’ve 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 (often one to 10) or through retirement. The longer the benefits period, the more you’ll pay in premiums for your coverage.
What Does Long-Term Disability Insurance Cost?
As with all insurance policies, your cost for long-term disability insurance will depend on your personal factors as well as the policy features you choose. Typically, however, premiums will cost around 1% to 4% of your annual income.
As we saw in the examples above, a 35-year-old nurse practitioner in Virginia could expect to pay around $150 to $170 per month for $4,000 in disability insurance coverage, for a 10-year benefit. However, this could vary greatly based on location, medical exam results, and optional riders.
