What Is Long Term Disability and How Does It Work?

Long-term disability insurance provides a portion of your income if a prolonged illness or injury prevents you from working. This coverage offers financial stability, helping individuals meet ongoing financial obligations and maintain their standard of living during an extended medical absence.

Defining Long-Term Disability

Long-term disability (LTD) insurance replaces a portion of your income for extended periods when you are unable to work due to a non-work-related injury or illness. Unlike short-term disability, which typically provides benefits for a few weeks to six months, LTD coverage extends for much longer periods. Benefits commonly last for several years (e.g., two, five, or ten years), and some policies may continue payments until you reach retirement age (around 65 or 67) or until recovery.

The monthly benefit amount is generally calculated as a percentage of your pre-disability income, usually ranging from 50% to 80% of your gross wages. This percentage is set by your policy, often with a maximum monthly payment cap. For example, if your policy covers 60% of $5,000 monthly earnings, your benefit would be approximately $3,000 monthly.

LTD coverage is available through employer-sponsored group plans and individual private policies. Group plans are often provided as an employee benefit by employers. Individual private policies are purchased directly, offering more customization. Both types provide income replacement, but their provisions and flexibility can differ.

Qualification Requirements

To qualify for long-term disability benefits, individuals must meet specific criteria outlined in their insurance policy, based on the definition of disability. Policies typically use one of two main definitions: “own occupation” or “any occupation.” An “own occupation” definition means you are disabled if you cannot perform the duties of your specific job. This definition is often more favorable for specialized professionals, allowing benefits even if they could perform a different job.

In contrast, an “any occupation” definition means you are disabled only if you cannot perform the duties of any occupation for which you are reasonably qualified. Many policies start with an “own occupation” definition for an initial period (e.g., 24 months) before transitioning to “any occupation.” Policies also include an “elimination period,” a waiting period from disability onset before benefits begin. This period commonly ranges from 90 to 180 days, and short-term disability benefits may cover this gap.

Medical evidence is crucial for a disability claim, requiring documentation to prove your inability to work. This includes medical records from healthcare providers, physician statements outlining diagnoses and limitations, and diagnostic test results. The documentation should demonstrate how your condition impacts daily activities and work tasks.

Pre-existing condition clauses can affect eligibility, particularly in individual private policies. These clauses generally exclude coverage for conditions diagnosed or treated within a “look-back period” (e.g., three to six months) before coverage began, if disability occurs within a timeframe after enrollment (e.g., 12 to 24 months). While group plans might cover pre-existing conditions after a waiting period, individual policies often exclude them.

The Application Process

Applying for long-term disability benefits begins with notifying your employer or insurance provider when a disabling condition arises. This notification initiates the claim and secures your policy rights. If employer-sponsored, speak with your human resources department for forms and policy documents.

Next, complete the required application forms. These typically include claimant, employer, and physician statements, requiring details about your condition, job duties, and financial information. Provide supporting documentation, such as medical records (diagnosis, treatment, prognosis) and test results. Employment records, including job descriptions and income verification (e.g., pay stubs, tax returns), are also necessary to establish pre-disability earnings and work impact.

After submission, the insurer will review your application and supporting documents. This review typically takes around 45 days for an initial decision, but can extend to three or four months, especially for policies governed by federal laws like ERISA. The insurer may request additional information or clarification to evaluate your claim. Respond promptly and in writing to all requests, keeping copies for your records. If a claim is denied, policies outline an appeals process, allowing you to submit further evidence for reconsideration.