Understanding Long-Term Disability Insurance: Its Meaning and Functioning
Long-term disability (LTD) insurance provides financial assistance if you become disabled and are unable to work or work at the same capacity as before. Such policies usually span over several years, possibly five or 10 years, depending upon the policy chosen. An alternate option is short-term disability insurance, which covers a shorter period if you become disabled and is typically offered by employers.
Long-term disability coverage is often provided by employers, but you can additionally purchase an individual disability insurance policy independently. However, short-term policies are more challenging to obtain independently, as they are usually only provided through employers.
Long-term disability insurance differs from Social Security Disability Insurance (SSDI), also known as going on disability , which is provided by the government. The benefits of long-term disability insurance cover you regardless of disability due to injury or illness that prevents you from working at all or functioning at your previous full capacity.
To qualify for long-term disability benefits, you must file a claim documenting your illness or injury and await approval from the insurance company. Long-term disability insurance pays a portion of your wages, usually between 40% to 65% of your pre-disability earnings. The coverage includes disabilities caused by a variety of injuries and medical conditions. However, the policy may not cover every injury or illness. The cost of an individual long-term disability insurance policy is calculated based on annual salary and other factors.
Long-term disability insurance is also available through your employer as part of a benefits package. Alternatively, you can also buy your own individual long-term disability insurance coverage. Insurance companies that offer long-term disability insurance include Aetna, Blue Cross Blue Shield, and Cigna.
Long-term disability insurance provides a steady income when you’re unable to work, helping you avoid financial hardship. If you’re unable to work for a longer period, you might want to consider long-term disability insurance, particularly if you don’t have substantial savings.
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