Long-Term Disability Insurance: What Is It & How Does It Work?

Long-term disability coverage is disability insurance that pays a portion of your lost wages if you’re injured or become ill and can no longer do your job. Long-term disability payments may be available for many years—for example, five or 10 years—depending on the policy.

If you’re buying an individual disability insurance policy (as opposed to one through a workplace), you’ll choose the benefit length, which is the number of years that you can receive benefit payments or the age limit for coverage, such as coverage to age 65.

Long-term disability insurance is a benefit often offered by employers, but you can also buy an individual disability insurance policy on your own. That’s different from short-term disability insurance, which is typically only offered by employers and is for a smaller period if you become disabled. It’s much more difficult to find a short-term policy on your own compared to a long-term disability policy.

Long-term disability insurance is also different from Social Security Disability Insurance (SSDI). SSDI, often referred to as “going on disability,” is offered through the government if you can’t work and you’ve contributed to Social Security.

Total vs. Partial Long-Term Disability Insurance

Total long-term disability insurance pays you if you can’t work at all regardless of the job because of an injury or illness. Partial long-term disability pays you if you’re able to work but not at your previously full ability.

You have to file a claim documenting your illness or injury and wait for approval from the insurance company to qualify for long-term disability benefits. Once approved, long-term disability insurance pays a percentage of your wages after the elimination period is over, up to the end of your coverage period. Payments are usually made monthly.

When you buy an individual long-term disability policy, you select the elimination period, or waiting period, which is the time between when you’re unable to work and when disability payments begin. Elimination periods may end as little as 30 days after the disability or as long as a year or two, depending on the company and policy.

Longer elimination periods generally mean cheaper premiums, but you sacrifice prompt disability payments.

Long-term disability insurance typically pays 40% to 65% of your pre-disability earnings, up to a maximum amount, but you can find policies that pay up to 80%.

Long-term disability insurance can cover disabilities caused by a range of injuries and medical conditions. These can include:

• Brain injuries.
• Burns.
• Cancer.
• Kidney disease.
• Heart attack, stroke, heart disease and other circulatory issues.
• Mental health issues, such as anxiety, bipolar disorder and depression.
• Musculoskeletal disorders, such as chronic neck and back pain, ruptured discs and rheumatoid arthritis.

An insurance policy’s definition of a disability is something you want to understand when buying a policy. That definition may influence whether you receive disability payments based on your issue. It’s important to note that insurance companies will also consider how your injuries or medical conditions affect your ability to work when reviewing claims.

Long-time disability policies don’t cover every injury or illness. Exclusions often include:

• Pregnancy, except for complications from pregnancy.
• Injuries related to committing a felony.
• Active participation in violence.
• Intentional, self-inflicted injury.
• Disabilities that begin while you’re incarcerated.
• War.

An individual long-term disability insurance costs 1% to 3% of your annual salary, according to Life Happens, an industry-funded group that provides insurance education.

That means you will likely pay between $1,000 to $3,000 annually or $83 to $250 monthly if your annual salary is $100,000.

In addition to annual salary, other factors used to calculate the cost of disability insurance include:

• Age
• Benefit period length
• Disability definition
• Elimination period
• Gender
• Health
• Monthly benefit amount
• Occupation

Whether you qualify for long-term disability insurance payments depends on your policy, including the “definition of disability.” That definition in your policy dictates whether your disability is eligible to receive long-term disability payments.

An insurance company will look into whether the injury or illness forbids you from working in your current role or any job. That’s called “own-occupation” and “any-occupation” in long-term disability insurance. What your policy dictates influences whether you qualify for disability payments and how much you pay for coverage.

For instance, if you’re disabled and can’t work your specific job but can perform other tasks at your employer, your long-term disability coverage may not approve your claim if you have any-occupation coverage.

Being diagnosed with a life-threatening illness doesn’t automatically mean you qualify for payments. You can get other types of coverage that may provide financial help if you’re concerned about the potential economic hit from a future medical diagnosis,

For instance, critical illness insurance, cancer insurance and supplemental health insurance are types of insurance that may offer payments if you’re concerned about that scenario. Those plans aren’t influenced by your salary, You instead may get a lump sum or ongoing financial assistance dealing with a future health issue.

You can often get long-term disability insurance through an employer as part of a standard benefits package, along with health insurance and dental insurance. You can also buy individual coverage.

An employer long-term disability insurance plan will likely limit your options. Buying your own individual long-term policy means you get to choose the elimination period and benefit period.

Insurance companies that offer long-term disability insurance include:

• Ameritas
• Assurity
• MassMutual
• Mutual of Omaha
• Principal Financial

Short-term disability insurance and long-term disability insurance differ more than just how long you can receive benefits.

	Short-term disability insurance	Long-term disability insurance
What is it?	Reimburses you a portion of your salary for a short period if you become disabled.	Reimburses you a portion of your salary for a longer period if you become disabled.
How much does it cost?	Monthly rate can be under $2 per $10 weekly benefit	1% to 3% of your annual salary
How much does it pay out?	40% to 70% of your income	40% to 80% of your income
How long are benefits?	Three to 12 months	Six months to 10 years
How long is the elimination period?	One or two weeks	A month to 2 years
How can you get it?	Typically through an employer	Either through an employer or individual coverage

See MoreSee Less

Specific information depends on the policy and may differ by your salary, age and other factors.