Does Long Term Disability Cover Cancer?

Long-term disability (LTD) insurance replaces a portion of your income if an extended illness or injury prevents you from working, helping individuals maintain financial stability. While many understand disability insurance, its application to specific conditions like cancer often raises questions. This article explains how long-term disability insurance functions and supports those navigating a cancer diagnosis.

Understanding Long-Term Disability Insurance

Long-term disability insurance differs from short-term disability insurance, which covers shorter periods, typically ranging from a few weeks to twelve months, and has a shorter waiting period. In contrast, long-term policies are designed for more serious conditions that can keep an individual from working for years, sometimes even until retirement age.

Coverage for long-term disability generally comes from two sources: employer-sponsored group policies or individual policies purchased directly. Group policies, often provided as an employee benefit, may have premiums paid by the employer, though benefits received might be taxable. Individual policies, while typically more costly, offer greater customization, are portable if you change jobs, and their benefits are usually tax-free if premiums are paid with after-tax dollars.

The “elimination period,” also known as a waiting period, is the time between the onset of disability and when benefits begin. This period commonly ranges from 90 to 180 days, though it can vary from 30 days to a full year, and claimants must cover their own expenses during this interval. The “benefit period” specifies the maximum duration for which benefits will be paid, often set for 2, 5, or 10 years, or extending to age 65 or 67.

The “benefit amount” typically replaces 50% to 70% of a policyholder’s pre-disability income, with some policies offering up to 80%. A policy’s “definition of disability” determines eligibility for benefits. An “own occupation” definition means you are considered disabled if you cannot perform the substantial duties of your specific job before disability, even if you could work in a different field. Conversely, an “any occupation” definition is more restrictive, requiring that you be unable to perform the duties of any reasonable occupation for which you are qualified by education, training, or experience. Many policies transition from an “own occupation” definition to an “any occupation” definition after an initial period, often 24 months.