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How Long Does Long-Term Disability Last?

Victor Peña Dec. 15, 2021

One in every four 20-year-olds today can expect to be out of work for at least a year due to a disabling condition before they reach retirement age. Even worse, consumer bankruptcy studies have shown that 77.8% of all filings are because of medical bills that got out of hand, including 44.3% citing medically-related work loss as a cause.

If a disabling condition forces you to miss work on a long-term basis, unless you have disability insurance, you may find yourself in a financial crisis.

Three out of every 10 Americans claim that they can’t even pay a $400 emergency expense without using a credit card or borrowing the money from family, friends, or a bank. Some 40% of U.S. households claim to have just enough to cover three months of recurring expenses from their current savings and 28% say they can only last six months.

For these reasons, if your employer offers a company-sponsored long-term disability (LTD) policy, it’s a good idea to participate. Sometimes the employer will even pay part or all of the premium. If your employer does not offer an LTD plan, you can purchase one on the open insurance market.

The question then becomes: how long will an LTD policy cover you once you become disabled?

Getting helpful guidance in these situations can be beneficial. Located in Fort Lauderdale, Florida, my firm handles cases in any city throughout the country.

The Duration of Long-Term Disability Benefits

If you purchase your LTD policy through your employer, the payout period may be set and uniform for all employees. If you purchase your own policy, the typical period is for two years, five years, 10 years, or until you reach retirement. According to the Council for Disability Awareness, the average disability claim lasts for a little under three years, so a five-year policy is generally sufficient.

Often, the increase in the premium for a longer duration of benefits is not that much, so buying a policy that pays you benefits until retirement might be worth the added expense. This is especially true for people in professional careers such as doctors, nurses, and dentists who rely on fine motor skills, where any erosion of those skills could lead to long-term career consequences.

LTD Benefits

Long-term disability insurance is designed to provide a monthly cash benefit to cover your basic living expenses. Generally, LTD wage replacement comes in at about 50-70% of your monthly income, with 60% being fairly standard.

LTD policies, however, also have a monthly cap, ranging anywhere from $4,000 to $25,000, which you can determine when you purchase your plan. Generally, the higher the cap, the higher your premium. For employer-sponsored policies, you will have to check the plan description summary that comes with the policy to verify the amount.

Policies also may or may not include a cost-of-living adjustment (COLA) clause, which will raise your monthly payout annually by either a set amount or by using a formula such as the Consumer Price Index (CPI). You can often choose this option when purchasing your policy.

Social Security Offset

The Social Security Administration (SSA) also offers disability benefits for those who have paid into the system long enough to qualify, providing an alternative for those who lack LTD employer-based or private coverage. It is hard to qualify, however. You must be facing a disability that will last at least 12 months or until death, and to apply you must have been disabled for five full months.

The catch here is that your LTD provider can force you to apply for Social Security Disability Insurance (SSDI), which is what the program is called. If you qualify, the insurer will then deduct the amount you get under SSDI from your LTD benefits. Say SSDI pays out $1,000 a month, and the LTD is paying $2,000, your insurer will reduce your LTD benefit to $1,000 a month under what is called the Social Security “offset.”

Factor in the Elimination Period

It’s important to note that LTD policies don’t kick in immediately. They carry a provision called the elimination period, which means you have to wait to receive your benefits when you qualify. If you purchase your own policy, you can choose from different elimination periods. Typically, they will run from 30, 60, or 90 days, or even up to six months or a year. The shorter periods will generally increase your premium.

If you have an employer policy, you’ll need to check the plan to see what the elimination period is.

Lump-Sum Option

In some instances, your LTD insurer may voluntarily offer to buy you out with a lump-sum cash payment. In other instances, you may see a lump sum as a better alternative, so you can avoid periodic reviews and mandatory doctor visits. You may also need the money to take care of immediate expenses, or even to make an investment.

If you want to request a lump sum settlement from your insurance provider, contact an LTD disability attorney to set everything in motion. Located in Fort Lauderdale, Florida, my firm handles cases nationwide, including clients located in and around the areas of Los Angeles, Seattle, New York City, and Chicago.