What Is Long-Term Disability Insurance?

By Renee Gerber , last updated September 30, 2011

Long-term disability insurance is exactly what it sounds like: money that covers you for the long-term when you have been deemed disabled on a long-term capacity. This money replaces the income that you would have otherwise been making at a regular full time job. In many cases, the individual will start off with short-term disability, which lasts anywhere between three to six months. Once the person goes past the three or six month point and is still unable to return to regular work, the disability coverage will then transition into long-term disability. This type of coverage will pay a portion of your salary, usually between 50 to 70 percent, and you will receive the benefits from two to five years or until you reach legal retirement age.

In many cases in the past, the company for which the injured or disabled person worked paid for long term disability coverage. However, with times natural changes, that is no longer always the case. Generally speaking, long-term disability coverage is either fully paid for by the employer, fully paid for by the employee, or the cost of the long-term disability plan can be shared between both the employer and the employee. If the employer is solely responsible for the money that goes toward the long-term disability coverage, they have the ability to choose what percentage of the person's salary will be paid toward it in the event the individual is injured and needs payment through the long-term disability insurance. Some organizations also pay only five to 10 years of disability, while others will continue to pay until the employee reaches the age of 65, when they could retire.
Of course, there are certain criteria that an employee must meet before they can qualify for coverage of long-term disability insurance. The individual must be a full time worker and obviously must have worked for the company for a certain period of time before they will be qualified for coverage. This amount of time may vary, depending on the company itself.
In some cases, the company will cover up to 80 percent of the individual's salary toward their long-term disability insurance. The employee will very likely also be required to take a medical exam for each of the first three years they begin to collect payments on the insurance. This is to ensure that the individual is legitimately unable to return to work and relies on this money in order to live.
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