How Long Do Long-Term Disability Insurance Benefits Last?
Key Takeaways
Depending on whether or not your long-term disability insurance is through your employer, benefits can last for different periods, such as two years, five years or until you reach about age 66.
With individual disability coverage, you have the option to choose your coverage period when you get the policy.
Because the cost of a supplemental individual disability insurance policy is reasonable (usually 1–3 percent of annual salary), advisors typically recommend—and clients usually choose—to maximize their protection with the longest coverage available.
Ken Latus is a vice president of Insurance Solutions at Northwestern Mutual.
Employer-sponsored and individual long-term disability insurance can be a key part of a financial plan. That’s because this type of insurance can help replace a portion of your lost earned income if an illness or injury prevents you from working for an extended period. But what happens if you ever need to collect those benefits? How long do long-term disability insurance benefits last?
Ultimately, the answer depends on the policy. Once a claim is approved, benefits are payable for a specific duration known as your “maximum benefit period.” This period is the longest amount of time you could be eligible to receive disability benefits while you are sick or hurt and unable to work. It can be as short as two years or up to age 67 or 70 (i.e., your Social Security normal retirement age) as long as you have a covered disability.
For a more specific answer, let’s dig deeper into the purpose of long-term disability insurance and the two main factors that determine how long you can collect a benefit.
What is the purpose of long-term disability insurance?
Long-term disability insurance replaces a portion of your earned income if you get sick or hurt and are unable to work. This type of insurance can provide coverage for many years. It is designed to replace income, both for everyday expenses and to help keep your financial goals, like saving for your retirement, on track.
While many people believe that accidents are the primary reason for long-term disability claims, most claims actually stem from common conditions such as these:
- Musculoskeletal issues (e.g., bone, muscle and joint problems resulting from sports and orthopedic injuries)
- Pregnancy complications
- Cancer
- Mental disorders and substance abuse
Where do I get long-term disability insurance?
If you have a benefits package at work, there’s a good chance that you have some coverage. However, most employer-provided plans, known as Group Long-Term Disability (LTD) insurance, cover only about 60 percent of your pre-tax earnings,1 up to a specified maximum (typically $5,000 to $10,000 per month). Those benefits are usually taxable and coverage depends on your continued employment. For that reason, many people choose to get supplemental individual long-term disability insurance on their own.
When researching supplemental individual long-term disability policies, you’ll want to pay close attention to two contract provisions relating to when benefits start and how long they last while you are disabled:
- The beginning date (elimination period): Also called a “waiting period,” this is the time you must wait while disabled before you’re eligible to begin receiving benefits, typically after 90 days of disability. The 90-day wait for benefits to begin is why short-term disability insurance is also important. Otherwise, you would need to rely on other resources to cover expenses during this period.
- The benefit duration (maximum benefit) period: This is the longest amount of time you could be eligible to receive disability benefits. Options might range from two years and up to age 67 or 70. Policies with longer benefit periods will cost more than those with shorter periods.
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Choosing your policy’s benefit period
When you’re applying for an individual supplemental long-term disability insurance policy, you’ll be able to choose your policy’s benefit period. Advisors typically recommend—and clients usually choose—to maximize their protection with the longest coverage period available. This is because the cost difference between shorter and longer benefit periods is not significant.
Aspects to consider
Unlike other types of insurance, for which the amount you need can vary based on a number of factors, disability insurance is more straightforward. Unless you are financially independent, you rely on your income to maintain your standard of living. Therefore, you typically want to cover as much of your income as possible. Here are some things to consider.
- To be fully covered, you may want a benefit period that lasts the whole time you plan to work and save toward retirement.
- You might plan to "sync up" your DI benefit period with your retirement and when you plan to start taking Social Security.
- You may need more coverage if you’re paying back student loans, car loans, a mortgage or other debt.
As you can see, there are a lot of aspects to think about. You might want to talk with your Northwestern Mutual financial advisor to help find the right policy for you.
The duration of your condition
Long-term disability policies help replace a portion of your income that you would otherwise lose due to an illness or injury. So, if your health improves and you’re able to resume work, your benefits will end. Your policy, however, may continue and still be available to you should you become disabled again.
How long can a person be on long-term disability?
If you remain disabled and unable to do your job, you can continue to receive benefits through your maximum benefit period for covered disabilities. This can be for a few years or until you reach a certain age—it all depends on the terms of your contract.
It’s important to understand the specifics of your policy because coverage can vary significantly among policy types and insurers. If you have been provided with a group LTD policy as an employee benefit, obtain an official copy of your policy before an unexpected sickness or injury occurs. Understanding how your coverage works can ensure you get your benefit when financial assistance is needed most. A financial advisor can help you understand what you are entitled to under your current plan and how an individual supplemental policy can provide additional protection.
Let’s protect your income.
Your advisor can show you how disability insurance fits into your financial plan.
Find your advisorDo I really need long-term disability insurance?
You likely insure your home, car and even personal belongings like jewelry. Replacing these assets can be expensive if something happens to them. But an even bigger asset is your ability to earn money in the future. Wealth from human capital is often overlooked because it doesn’t appear on a conventional balance sheet, yet all of your financial goals and lifestyle aspirations depend on these future earnings. Many families are unaware of the severe consequences of a long-term disability, including the impact of lost income on their financial goals—as well as the physical and emotional challenges they may face.
Disability insurance protects your human capital and mitigates the loss of expected future earnings you rely upon to maintain your lifestyle. By paying a modest premium (usually 1–3 percent of your annual salary) each year, you can minimize the wealth lost during a long-term disability. Your Northwestern Mutual financial advisor can help you explore your options and show you how this insurance coverage fits into your larger financial plan.
To be used with form ICC16.TT.DI.IIB.(0916), ICC16.TT.DI.FIB.(0916), ICC16.TT.DI.CAT.(0916), ICC16.TT.NCDI.(0916), ICC16.TT.GRDI.(0916), ICC16.TT.DI.PDB.(0916), ICC16.TT.DI.PDBO.(0916), ICC16.TT.DI.TRU.(0916), ICC16.TT.DI.MED.(0916), ICC16.TT.DI.TRA.(0916), ICC16.TT.DOE.(0916), ICC16.TT.DOE.APB.(0916), ICC16.TT.DOE.FIB.(0916) or state equivalent. Not all contracts and optional benefits are available in all states. Disability insurance policies contain some features and benefits that may not be available in all states. The ability to perform the substantial and material duties of your occupation is only one of the factors that determine eligibility for disability benefits. These policies also contain exclusions, limitations and reduction-of-benefits provisions. Eligibility for disability income insurance, additional policy benefits, and qualification for benefits is determined on a case-by-case basis. For costs and complete details of coverage, contact your Northwestern Mutual Financial Representative.
Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) (life insurance, disability insurance, annuities, and life insurance with long-term care benefits)
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