Long Term Disability (LTD) can be used following Short Term Disability (STD) plans or alone.
Long Term Disability coverage provides wage replacement that is between 50-70% percent of your earnings before a non-work related injury impacted your ability to work.
If a LTD plan is offered through your employer, it is very important to sign up during the initial enrollment period, when you cannot be denied coverage for a pre-existing condition. Read the plan summary for definitions detailing what is covered as well as specific details required by your plan.
Most LTD plans include a waiting period that lasts from 3-26 weeks, which coincides with the length of time you can be paid for STD benefits, before you are eligible to begin receiving LTD benefits.
In order to continue to qualify for benefits detailed medical information must be provided to the LTD carrier initially and then throughout the life of the claim as requested. Failure to do so will result in termination of your benefit. If you are considered disabled longer than 90 days, most policies do not require you to continue paying premiums.
Most LTD policies have two definitions of disability: “Own Occupation” and “Any Occupation”.
- During the Own Occupation period, benefits are payable if the employee is unable to perform his or her regular job or a similar job. This period can last up to two years.
- After that, benefits are payable only if the employee is unable to perform Any Occupation for which he or she is or becomes reasonably qualified by education, training or experience.
Most LTD companies require you to apply for Social Security Disability (SSDI) benefits, and may provide assistance in the application process. Your LTD policy provides for what is known as an offset, or any benefit you receive from SSDI will reduce the benefit paid by the LTD policy.
If you are approved for SSDI and receive a retroactive payment check, you are normally required to pay the amount back received by the LTD company during the time which SSDI pays you.
In addition to STD and LTD, two additional federal disability programs you may be eligible for include Social Security Disability Insurance and Supplemental Security Income (SSI).
In order to be deemed disabled, you must have a medical condition that meets the Social Security Act (SSA) definition of disability, which is “having an illness or injury that is expected to last at least 12 months or if your condition may be considered terminal.”
Purchasing a long-term disability insurance plan will help you pay for your living expenses and support your family if you are injured or become too sick to work. Long-term disability insurance (LTD) benefits typically don’t start paying out for anywhere from three to six months after your injury or illness occurs, but how long the benefits go on depends on several criteria.
How to help determine how long long-term disability is and how to qualify for benefits.
How long does long-term disability insurance last? Many people find the details of long-term disability insurance a little confusing but the details are pretty simple once you know how long-term disability insurance and short-term disability insurance work together. You also need to know the difference between group disability insurance plans and private long-term disability insurance plans. Once you are familiar with the basic idea of how long-term disability insurance works and how short-term and long-term disability insurance can work together you’ll see why having this insurance is so important.
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Short-term disability insurance typically is a sort of bridge designed to pay you money immediately when you have to stop working because of a qualifying injury or illness. Some employers may offer some short-term disability insurance to employees as part of their benefits package. The money that you receive from short-term disability can help you pay for living expenses until your long-term disability insurance starts paying benefits¹.
Group disability plans that are offered through your employer have some advantages but they also have some disadvantages. When you sign up for group disability insurance through your employer the coverage is tied to your employment. If you leave that job then you will no longer be covered. You also may not be able to choose your benefit amount. And the length of the coverage term will depend on the group plan so may end up not being covered for as long as you would like.
Another possible disadvantage of choosing group disability is that your benefit amount may be much lower than you want it to be. If you choose to go with a group disability plan instead of picking a private LTD insurance plan your employer will set the amount of the benefit, not you. If you want to be able to choose the percentage of your salary that you will receive as a benefit from the insurance you should considering getting your own LTD insurance and not rely on the group plan².
You may be better off if you purchase long-term disability insurance directly from an insurance provider instead of choosing the group disability option at your workplace. Or you might want to buy LTD insurance to supplement the insurance that your employer is offering. No matter what type of long-term disability insurance plan to go with make sure that you read all of the details about the coverage, benefit amount, and waiting period so that you know how much of a benefit you’re getting and when it would kick in if you have to stop working because you are sick or injured.
As an example let’s assume that you were working as a store clerk where you need to be on your feet for 8-10 hours per shift, and you worked a regular 40 hour week. Then you were in a car accident and broke your back and you wouldn’t be able to do any kind of work where you had to stand for hours. Right after the accident you would be able to file for short-term disability benefits if you have a short-term disability insurance plan. That plan would start to pay benefits in a week or two and those benefits would be paid for up to six months depending on the terms of your policy.
Long-term disability insurance will start paying either at 90 or 180 days depending on the terms of your policy. Almost all long-term disability insurance policies have a waiting period of anywhere from 90-180 days³. Those benefits will be paid monthly for the length of your policy term, as long as you remain unable to work due to your disability, which can be anywhere from two years up until the time you are 65 if you have Guardian Life PayGuard Plus insurance. But if you only have group disability insurance from your employer you may only receive a limited amount of benefits because of the terms of the policy. With private long-term disability insurance you choose how long you want the policy term to be when you sign up for the plan.
How long does long-term disability work with social security disability?
One of the advantages of having LTD coverage is that the benefits start almost immediately and you don’t have to wait the way that you have to wait for Social Security Disability Insurance benefits. The Social Security Administration has a six month waiting period to pay out disability benefits.
You can have both private Long-term disability insurance and get Social Security disability benefits but social security may reduce their benefits based on what you are receiving from private long term disability insurance.
Private LTD insurance will continue to pay you a benefit for the term length that is specified in your insurance policy. When you purchase the policy you can decide how long of a term length and monthly benefit amount you want the policy to have. Some people choose a policy that lasts just two years while others choose policies that can last ten years, twenty years, or all the way up to retirement age⁴. Social Security Disability benefits will continue to pay until you hit retirement age or until you can return to work, if you can return to work.
When does long-term disability insurance kick in?
One of the most common questions people have about LTD insurance after “How long does long-term disability last?” is “When does long-term disability insurance kick in?” When your long-term disability insurance kicks in depends on the waiting or elimination period of your policy. If you have short-term and long-term disability coverage through your employer, short-term disability coverage will kick in first, and then the long-term disability will follow. If you have your own personal long-term disability coverage, it will kick in as soon as the policy waiting or elimination period has been met.
Voluntary long-term disability insurance
Voluntary or personal long-term disability insurance just means that it’s an LTD policy that you pay for yourself and not one that your employer pays for. Some employers will include paying for a short-term or long-term disability insurance payment as part of the compensation package that they offer to their employees. If your employer is paying the premium cost and not you then the policy isn’t a voluntary or personal long-term disability insurance policy. But if you’re buying the policy yourself then it’s a voluntary policy.
Will I get a w2 for long-term disability insurance?
It’s very common for people to be confused about whether or not the benefit money from long-term disability insurance is taxable or if they will receive a W-2 for the those benefits that they need to use to include that money on their taxes. You will get a W-2 before any taxes are due for whatever long-term disability insurance benefits you receive. Benefits from LTD insurance are treated like sick pay under the Third Party Sick Pay IRS rule⁵.
Guardian Direct® wants to help you understand short-term and long-term disability insurance and how long-term disability insurance can help protect you and your family from a loss of income if you become sick or disabled. We have assembled a large library of articles filled with tips, insights, and the information you need to know about long-term disability insurance so that you can make an informed decision when looking for LTD insurance policy and get the of coverage to help protect your future. If you want to learn more about direct to consumer individual long-term disability insurance and how it helps protect your income or find out more about long-term disability insurance in general we can help you find that information and find a LTD insurance plan.
Brought to you by The Guardian Life Insurance Company of America (Guardian), New York, NY. Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, investment or medical advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice.
Links to external sites are provided for your convenience in locating related information and services. Guardian, its subsidiaries, agents, and employees expressly disclaim any responsibility for and do not maintain, control, recommend, or endorse third-party sites, organizations, products, or services and make no representation as to the completeness, suitability, or quality thereof.
Individual disability insurance policy form 18PG is underwritten and issued by Berkshire Life Insurance Company of America, Pittsfield, MA, a wholly owned stock subsidiary of The Guardian Life Insurance Company of America, New York, NY. Product provisions and availability may vary by state.
In NY: These policies provide disability insurance only. They do not provide basic hospital, basic medical or major medical insurance as defined by the New York State Insurance Department. For policy form 18PG, the expected benefit ratio is 50%. For policy form 18PG-F, the expected benefit ratio is 60%. The expected benefit ratio is the portion of future premiums that the company expects to return as benefits, when averaged over all people with these policy forms.
This advertising content is not currently meant for anyone in the state of NM.
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Sources
//www.investopedia.com/best-short-term-disability-insurance-5072040, (May 2021), Last accessed August 2021.
//www.policygenius.com/disability-insurance/group-disability-insurance/ (October 2018), Last accessed August 2021.
//www.policygenius.com/disability-insurance/disability-insurance-elimination-periods/,(2019), Last accessed August 2021.
//www.disability-benefits-help.org/blog/long-term-disability-benefits-and-social-security-disability, (2020), Last accessed August 2021.
//www.xperthr.com/how-to/how-to-report-third-party-sick-pay-to-the-irs/17992/, Last accessed August 2021.
Brought to you by The Guardian Life Insurance Company of America (Guardian), New York, NY. Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, investment or medical advice.
Brought to you by The Guardian Life Insurance Company of America (Guardian), New York, NY. Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, investment or medical advice.(exp.10/22)