Is Long-Term Disability Insurance Worth It?

If an illness or accident occurs and you are unable to work, disability insurance can help you pay for basic living expenses, such as your mortgage and groceries. Insurance companies offer policies that help protect you for both short-term and long-term absences. Long-term disability insurance generally has higher benefits and longer payout time periods than short-term options, but its higher cost can raise the question “Is long-term disability insurance worth it?”

Features of long-term disability insurance

Long-term disability insurance begins paying benefits after you’ve been unable to work for a certain amount of time, known as the elimination period. The elimination period can be anywhere between 30 days and a year, depending on the policy. After the elimination period, you receive a percentage of your salary, usually tax-free, to use any way you wish (this applies to individual plans, as opposed to a plan you get through your employer). The benefits period depends on your policy, but typically ranges from two to 10 years, or until age 65.

When researching long-term disability insurance policies, consider the features and benefits offered by each policy, including premiums, monthly payouts, renewability, the age ranges covered and at what age coverage expires.

Pay particular attention to the optional benefits offered by each policy. Some insurance providers offer long-term disability insurance policies with extensive base benefits and a large selection of optional riders (at an additional cost) that can be customized to your unique situation.

Who can benefit from long-term disability insurance?

If being unable to work while recovering from a major illness or accident means you won’t be able to pay important expenses, long-term disability insurance can help provide a sense of security. You might also benefit from this type of insurance if any of the following apply to your situation:

  • You don’t have other sources of financial protection, such as savings or employer-provided disability insurance
  • Your employer provides disability insurance, but you want additional security
  • You’re the main source of income for your family
  • You have a family history of serious illness
  • You invested significant funds and time into your career, such as attending medical school, while incurring a lot of debt

Other considerations

Long-term disability insurance isn’t the only way to replace lost income if you’re unable to work. You can also consider using short-term disability insurance, Social Security disability insurance or workers’ compensation, or creating a fund to cover long-term disability.

Learn more about the basics of disability income insurance.