Long-Term Disability Insurance:
Why Every Working American Needs Coverage
Disability insurance goes by a lot of names. Some people call it paycheck protection or income protection. Other people call it disability income insurance, long-term disability insurance or individual disability insurance. Regardless of what you call it, this insurance product offers critical protection for any working American.
If you’re sick or injured and unable to work as a result, long-term disability insurance can replace some of your lost income. This helps you pay your bills and maintain your standard of life while focusing on your health and family.
Long-Term Disability Coverage
Disability can take many forms, including musculoskeletal disorders, cancer, heart disease, injuries and mental health disorders. The CDC says that 61 million adults inthe U.S. have some form of disability.
Although some disability risks increase with age, younger individuals are also vulnerable. The Social Security Administration says that more than one in four of today’s twenty-year-olds will experience disability before reaching retirement age.
When disability strikes during a person’s working years, medical problems can leadto financial ones. Many people in this situation find themselves having to pay out of pocket medical bills while being unable to continue earning anincome. For anyone living paycheck to paycheck, this can create an economic disaster immediately. However, even people with some savings may find themselves depleting their retirement funds and college tuition accounts quickly.
Long-term disability coverage provides a solution by replacing a portion of the lost income. Because the risk of disabilityis so great, this is an insurance product that all working Americans who depend on a paycheck should have.
How Long-Term and Short-Term Disability Insurance Differ
Long-term disability insurance is similar to short-term disability insurance, but there are several key differences.
The elimination period, also called the waiting period, is also different. This is the amount of time that must lapse before the policyholder can receive benefits. Because short-term disability insurance policies are designed to cover shorter health issues, the elimination period is short, often arounda couple of weeks. The elimination period for long-term disability insurance is longer, often around 90 days,although shorter and longer periods are available.
Short-term disability insurance may be adequate to covera broken leg or difficult pregnancy, but it may not be adequate for many health issues that require more recovery time or are permanent. In these cases, long-term disability insurance is needed. The good news is that you don’t need to pick one or the other. You can secure both types of coverage to makesure you’re protected
Securing Long-term Disability Insurance
Workers who want to purchase LTDI coverage may have options.
Employers often provide access to coverage. The premiums may be paid by the employer, or they may be paid by the employee on a voluntary basis. Employees can benefit from group rates and streamlined underwriting. For groups of three or more, a multi-life disability insurance discount may be available, and for groups of five or more, guaranteed standard issue disability insurance plans are available.
Individuals can also buy disability insurance on their own. Often called individual disability insurance, or IDI, these plans are fully portable. This means that workers don’t have to worry about losing coverage when they switch jobs or go into business for themselves. There are also more coverage options, allowing policyholders to customize their benefit periods, elimination periods, benefit limits, definitions of disability and additional coverage options.
employer-based LTDI and IDI. You can purchase both types of coverage to make sure you’re well protected.
Even if employers already offer short-term disability insurance coverage, they should consider adding long-term benefits, as well. These two products serve different purposes, and short-term coverage cannot replace long-term coverage.
Adding this benefit doesn’t have to break a company’s budget, either. When employers offer LTDI as a voluntary benefit, employees can pay for the entire cost of premiums through payroll deductions. Offering coverage represents a minor investment on the company’s part, but the return in employee satisfaction can be tremendous.
Helping Individuals and Employers Review LTDI Coverage
If you’re an insurance agent, you can help your clients by raising disability awareness and making sure they havethe right LTDI coverage for their needs.
When talking to employers, help them assess their employee benefit offerings.
Here are some questions to address:
• Are you offering LTDI to your workers? If not, it’s time to change this.
• Is enrollment in LTDI coverage high? LTDI provides important protection, but employees might not participate if they don’t understand their options. If participation rates are low, you might just need to provide some more employee benefits education.
• Are you offering the right LTDI options? Plans can vary in important ways, including benefits and cost.
When talking to individuals, help them determine what coverage they already have and whether it’s sufficient.
Here are some questions to ask:
• Do you have any coverage? If you don’t, think about what would happen if a disability prevented you from earning a paycheck. How long could you survive off your savings? What would happen next? If you don’t have good answers, you need to look into securing disability insurance.
• If you have coverage, what type of coverage do you have? Do you have long-term disability insurance or short-term coverage? Do you have portable individual disability insurance or job-based long-term disability insurance?
• Do you need more coverage? Consider whether the monthly benefits would be enough for you to live on. Also consider whether the benefit period and other-terms would be sufficient for your needs if you experienced an extended illness or serious injury. If you’re not happy with your current coverage, you can replace it, or you can stack policies to get