What is Long-term Disability Insurance?

Long-term disability (LTD) insurance is a type of insurance that provides financial protection for employees who are unable to work due to a disability. It can help to replace a portion of an employee's lost income and can provide important financial support for those who are facing a long-term illness or injury.
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Long-term disability (LTD) insurance is a type of insurance that provides financial protection for employees who are unable to work due to a disability. It can help to replace a portion of an employee’s lost income and can provide important financial support for those who are facing a long-term illness or injury.

The importance of long-term disability insurance for employees cannot be overstated. A disability can happen to anyone at any time and can have a significant impact on an individual’s financial stability and well-being. Without LTD insurance, an employee may have to rely on savings or other forms of financial assistance to cover their expenses while they are unable to work. Additionally, LTD insurance can also help to protect employees from the financial burden of high medical expenses that may be incurred as a result of a disability. Furthermore, it can also provide peace of mind and security, knowing that they will have a source of income if they become disabled. LTD insurance is a critical component of an employee’s financial safety net and can provide important financial protection in the event of a disability.

What are the Different Types of LTD?

Private LTD insurance is a type of insurance policy that an individual can purchase to provide financial protection in the event that they become disabled and are unable to work. Private LTD policies are purchased  and underwritten individually. Because these policies are individually underwritten, it may be more difficult to obtain private disability insurance than employer-sponsored disability insurance. Employer-sponsored LTD coverage is typically a benefit that is offered by an employer to their employees. The coverage is often provided at no cost to the employee and is intended to provide financial protection if the employee becomes disabled and is unable to work. Employer-sponsored policies are typically underwritten as a group.

Employer-provided coverage, if provided, may be limited in terms of the definition of disability, the waiting period, the benefit period and other factors. A private policy can provide more comprehensive coverage and typically has more favorable terms.

Can I Have Multiple Types of LTD Coverage?

Having a private LTD insurance policy in addition to employer-sponsored coverage can provide important financial protection in the event that an employee becomes unable to work due to a covered disability. Also, if an employee leaves the employer or loses their job, they may lose the employer-provided coverage. Having a private policy can ensure that the coverage continues regardless of the beneficiary’s employment status. A private LTD insurance policy can supplement any government-provided disability benefits, such as Social Security Disability Insurance (SSDI), and can provide income replacement benefits even if the employee does not qualify for government benefits. Some policies may require the employee to apply for other forms of disability benefits, such as SSDI, before they can collect benefits under the long-term disability policy. Some policies may apply for these benefits on behalf of the beneficiary after they apply for coverage. Individuals should carefully consider their options and understand the terms and limitations of any employer-provided coverage, as well as the potential benefits of purchasing a private LTD insurance policy.

What Does LTD Cover?

LTD insurance policies typically cover a wide range of disabilities, including both physical and mental disabilities. Some common types of disabilities that are covered under LTD insurance include:

  • Injuries or illnesses that prevent the individual from performing the material duties of their occupation.
  • Chronic conditions such as back pain, arthritis, and heart disease.
  • Mental health conditions such as depression and anxiety.
  • Neurological conditions such as multiple sclerosis and Parkinson’s disease.
  • Cancer and other serious illnesses.

One of the key features of LTD insurance is that it typically covers both physical and mental disabilities. This means that if an individual becomes disabled due to a physical injury or illness, such as a broken leg or cancer, or a mental health condition, such as depression or anxiety, they will likely be eligible to receive benefits under their policy.

This is important because many disabilities that prevent individuals from working are not physical, but rather mental or cognitive, like PTSD, bipolar disorder, or schizophrenia. Having coverage for these types of disabilities can provide important financial protection. This is particularly relevant as mental health is becoming more prevalent, and mental health conditions are the leading cause of disability worldwide.

Importantly, coverage and benefits provided by LTD insurance policies can vary widely. Beneficiaries should carefully review their policy and understand what types of disabilities are covered, as well as any exclusions or limitations that may apply.

How is "Disability" Defined?

The definition of “disability” can vary depending on the policy or context. It is important for beneficiaries to understand the specific definition of disability used in their employer’s policy and what types of disabilities are covered under that policy. This will help them understand their rights and benefits under the policy. For those covered by an employer-sponsored plan, they should review their policy and ask any questions they may have to their employer or HR representative.

What Benefits Does LTD Provide?

LTD insurance policies typically provide income replacement benefits to employees who become unable to work due to a covered disability. Benefits will be payable after a certain period of time, called the “waiting period,” and benefits will typically continue until the beneficiary reaches retirement age. A waiting period could last from a few weeks or up to 26 weeks. The policy will typically provide a percentage of the individual’s income, usually around 60-70 percent, to help cover living expenses while they are unable to work.

Is My Job Protected While Receiving Benefits?

Receiving employer-sponsored LTD benefits does not guarantee job security. In fact, it is not uncommon for employers to terminate an employee’s employment even after they have been receiving disability benefits for some time. However, The Employee Retirement Income Security Act (ERISA) Section 510 allows an employee to take legal action against their employer if they were fired with the intent of preventing them from exercising their rights under an employee benefit plan. It also protects employees from retaliation by their employer for trying to access these benefits.

If a beneficiary is receiving benefits through a private LTD policy, their relationship with their employer should have no bearing on whether they are eligible to receive benefits through that policy.

Can I Continue Receiving Benefits After Being Terminated?

When an employee is terminated from their employment, an employer-sponsored LTD insurance policy will generally continue to provide benefits, assuming the employee continues to meet the policy’s definition of “totally disabled” and the policy is still in force. However, if the employee is terminated for cause, such as gross misconduct, the insurance company may investigate and potentially deny the claim if the terms of the policy feature an exclusion governing “for cause” termination.

The outcome of an employee’s termination also depends on whether the LTD insurance policy is handled by a third-party plan administrator or if the policy is self-funded, where the employer pays benefits directly. An employer with a self-funded LTD insurance policy has greater freedom to terminate benefit payments at their own discretion.

How Do I Apply for LTD Benefits?

First, beneficiaries should understand the terms of their LTD insurance policy, including the definition of “totally disabled,” the waiting period, the benefit period, and any exclusions. They should also be aware of any deadlines or requirements that they need to meet in order to file a claim, such as providing proof of their disability or continuing to pay premiums. After reviewing the terms of your policy, you should contact your HR representative or plan administrator to begin the process of applying for benefits.


CHeST Endorses the Stop the Wait Act

CHeST is proud to announce its endorsement of the Stop the Wait Act (H.R. 883 and S. 320), which seeks to end the 5-month waiting period for individuals to receive Social Security Disability Insurance (SSDI) benefits, as well as allow those who are uninsured or unable to afford insurance during the 29-month waiting period for Medicare to receive coverage.

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