Is Long-Term Disability Insurance Worth it?

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Purchasing long-term disability (LTD) policies can be a worthwhile expense for employees. LTD policies provide incomes for insured people when they are unable to work for long periods due to illness or injuries. These insurance plans can be purchased through insurance companies individually by employees, or LTD coverage can be obtained through plans sponsored by employers.

Facts About Long Term Disability

Long-term disabilities are not rare occurrences for workers. According to the Social Security Administration, a worker 20 years or older has a 30 percent chance of becoming disabled at some point before reaching retirement. The average length of long-term disabilities is 2 1/2 years, according to the Council of Disability Awareness (CDA). In 2008, the CDA reported the top cause of long-term disabilities was musculoskeletal/connective tissue disorders (22.8) percent), followed by cancer (13 percent).

LTD Features

LTD policies can provide coverage for two years or last the rest of the insured's life. The waiting periods may last several weeks or months before insureds receive policy benefits. These policies can be purchased as either non-cancelable or guaranteed renewable. Non-cancelable LTD policies cannot be canceled by the insurers unless the policy owner does not pay the premiums. Policy benefits cannot be reduced and premiums cannot be raised. Guaranteed renewable policies also cannot be canceled by the insurers, but they can increase premiums if it is done to all policy owners in the same rating class.


Insurers consider many factors before extending or denying applicants LTD coverage. These include the applicant’s age, health, gender, job or occupation, coverage amounts and work industry. Premiums charged to applicants are based on their risks to the insurance company. If they pose a high risk, their insurance payments are higher than the insurer’s standard rates. However, insurers can also deny risky applicants coverage altogether.


It is possible that individuals working in construction or other physically demanding occupations pay less in premiums than clerical employees. This is because one of the factors determining premium amounts is the claims history of a profession. Although physical laborers are at risk of suffering more devastating injuries, for instance they might not submit as many claims as office personnel.


All disability policies, including LTD plans, do not cover the insured's entire salary. This is to avoid creating a disincentive for people to get back to work. Typically LTD plans cover between 60 and 70 percent of the insured's earnings, according to MetLife. However, policyholders can purchase supplemental disability insurance policies to make up the income gaps. The importance of LTD coverage is illustrated by the fact that more individuals lose their homes to disability than to fires or deaths, according to

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