How to Insure Your Income: Long-Term Disability
Long-term disability policies provide for longer elimination and benefit periods than short-term policies. Typically, the elimination period will be 90 days or six months. Most often, LTD policies provide benefits to age 65; sometimes they provide benefits for the rest of your life.
The amount of the long-term benefit also is limited to a percentage of your pre-disability earned in-come -- from a low of 60 percent to a high of 75 percent, depending on the policy and insurance company.
The claims process for LTD benefits is a little more complicated than for STD benefits. Normally, you and an attending physician must complete a claim form periodically -- every month, once a quarter, etc. -- for the duration of the claim. This will be in addition to the initial claim form you'll need to complete when you first notify the company that you've been injured.
A caveat: Make sure that you inform the disability insurance company as soon as possible when you've suffered a disabling sickness or injury. In many cases, the company won't begin the elimination period until it's been informed -- so benefits don't start until six months or a year after that.
Insurance companies paying LTD benefits also may look more carefully into the status of the claim. (They are supposed to use the elimination period to do this, though many don't start their investigations until they've started paying benefits.)
A company will look for anything about the claim that might disqualify it under the exclusions section of its policy. Common objections include:
- a claim has arisen from or occurred in the course of work -- and therefore should be covered by workers' comp;
- the policyholder did not inform the company about the injury or sickness in a timely manner;
- the person making the claim is not totally disabled;
- other available insurance reduces the benefits it must pay to a small percentage of previously earned income.
This last issue can raise all kinds of problems. LTD policies usually provide for integration of plan benefits with other disability income benefits payable to the insured. The LTD benefit may be offset by any of the following:
- benefits provided by another formal employer plan;
- benefits payable under workers' comp or any similar statutory program;
- benefits payable under Social Security.
The purpose of this integration is to prevent overinsurance.
The claims process usually is simplified with presumptive disabilities -- like loss of vision or a limb. For this kind of claim, there is a single claim form completed at the onset of the claim.
