The importance of having long-term disability insurance
Long-term disability insurance (LTD) is a type of income insurance that covers severe accidents and illnesses that force you out of work for three months or longer. It may be bought individually, as part of a group, or both! LTD is a smart investment for healthy, employed individuals who want to secure their financial future.
In most cases, long-term disability insurance functions similarly to other types of insurance. As the policyholder, you pay regular premium fees usually on a month-to-month basis, and in exchange, the insurance company pays you long-term disability coverage if you are unable to work for an extended period of time due to a serious accident or illness.
Do I need long-term disability insurance?
Suppose you rely on your source of income. In that case, you need long-term disability insurance, especially if you have family members who depend on you. Whether you're sitting behind a laptop all day or washing a high-rise window façade – it doesn't matter (except that the riskier your job, the higher the disability insurance premium). Becoming disabled doesn't only happen from freak accidents, but from unexpected illnesses that can occur suddenly and unpredictably. Nothing should prevent you from protecting your income for the long haul.
The cost of long-term disability insurance
On average, long-term disability benefits can cost between 1% and 4% of your current income on average.
How much you pay for long-term disability insurance depends on several lifestyle and policy choices. That's because insurance companies underwrite long-term disability coverage based on the risk of an applicant filing a claim, plus how long and how much a person might collect in benefits. Key points to keep in mind about the cost of long-term disability insurance:
- It increases with age: the older you get, the more prone you become to injury or illness, so the best time to buy disability insurance is when you're young and healthy
- The more you earn, the more there is to ensure
- Your policy choices matter (look out for the benefit and elimination periods you select)
How much is long-term disability insurance?
The benefit amount of your policy determines how much long-term disability you will receive if you become disabled due to a serious accident or illness. Your benefit amount will almost always be a percentage of your salary, typically replacing 60% to 80% of your income, and the size of your disability insurance payout will depend on the policy.
Many policies also replace the income that is lost income if you are forced to take a lower-paying job as a result of an accident or illness.
Are long-term disability insurance payments taxable?
Choosing the right policy for you can be confusing, particularly when tax considerations are factored in. Long-term disability benefits can either be taxable or non-taxable. In general, whether your long-term disability benefits are taxable depends on a number of factors, such as whether you are part of a group policy or an individual policy, whether you pay your premiums with pre-or post-tax dollars and the percentage of how much of your premiums you pay within your policy.
In conclusion, you need long-term income protection. Not being able to work because of a disability is more common than you probably think, it can occur in any professional setting, even if you work in an office environment. Statistics show that most long-term disability claims don't actually result from accidents, instead, they are caused by health and wellness issues such as cancer, heart disease, back problems, and even arthritis, illnesses that can affect anyone in any job.
Choosing whether or not to insure your income is one of the most important choices you'll ever make.
See our income insurance pricing here.