Long-term disability coverage picks up where short-term disability insurance leaves off. Once the short-term benefits expire, long-term disability insurance pays a percentage of your salary, usually 50 to 60 percent, depending on the policy. The benefits last until you can go back to work or for the number of years stated in the policy.
An important point to remember is since you will pay your own premiums with after-tax dollars, your disability benefits will be tax-free. If your employer pays for the policy, most likely with pre-tax dollars, you’ll have to pay income taxes on the benefits.
If you become disabled and begin receiving benefits, you will no longer have to pay premiums. Most policies contain a “waiver of premium” provision that states you can stop paying premiums if you are disabled for 90 days or longer.
Did You Know?
Long-Term Disability fulfills a special need not addressed by Short-Term Disability policies.
About 110 million Americans do not have long term disability insurance.
Alternate life programs, in many cases, can be less expensive for a 42 year old or older employee.