What long-term disability insurance does

Long-term disability insurance replaces a portion of your income if you become unable to work due to illness or injury for an extended period — typically lasting months or years. The policy pays you a monthly benefit, usually 50 to 70 percent of your pre-disability salary, after an initial waiting period called the elimination period.

Most long-term disability policies begin paying after you have been out of work for 90 days, though some start at 30 days or extend to 180 days. The benefit continues until you return to work, reach retirement age, or the policy's maximum benefit period ends — commonly at age 65 or for a set number of years like five or ten.

This insurance exists because short-term disability (if you have it) runs out quickly, and your regular paycheck stops while medical bills and living expenses do not. Long-term disability bridges that gap so you are not forced to drain savings or take on debt while recovering.

Key Takeaways

  • Long-term disability replaces 50 to 70 percent of your income after a waiting period, usually 90 days, and continues for months or years depending on your policy terms.
  • Most policies cover illnesses and injuries but exclude self-inflicted harm, substance abuse, and conditions that existed before you enrolled, though some allow coverage after a waiting period.
  • You can obtain long-term disability through your employer, as an individual policy, or sometimes through professional associations, and employer plans are usually cheaper because the cost is shared.
  • The elimination period you choose — how long you wait before benefits start — directly affects your premium; longer waits mean lower monthly costs.
  • Your policy will require medical documentation to prove you cannot work, and the insurer may request updates or independent medical exams before continuing payments.

How the elimination period affects your cost and coverage

The elimination period is the number of days you must be unable to work before the insurance company begins paying you. Common options are 30, 60, 90, or 180 days. This is not a waiting period to receive the policy — it is how long you wait after becoming disabled before the first check arrives.

A shorter elimination period costs more in monthly premiums because the insurer takes on risk sooner. A 30-day elimination period might cost 40 to 50 percent more than a 90-day period for the same benefit amount. If you have savings that can cover three months without income, a 90-day elimination period is usually the better financial choice. If you live paycheck to paycheck, a shorter period protects you but increases what you pay each month.

Coordinate your elimination period with any short-term disability you have. If short-term disability covers you for 60 days, choosing a 90-day elimination period on long-term disability means a 30-day gap where you receive nothing. Many people choose a 90-day elimination period because it aligns with the end of short-term benefits or paid leave.

What conditions and situations are covered

Long-term disability covers most illnesses and injuries that prevent you from working — cancer, heart disease, back injuries, mental health conditions, pregnancy complications, and surgery recovery are common examples. The policy pays regardless of whether the condition is work-related; you do not need workers' compensation to file a claim.

Policies exclude certain situations. Self-inflicted injuries, attempted suicide, and injuries from committing a crime are typically not covered. Substance abuse and alcohol-related disabilities are usually excluded, though some insurers cover the condition if you enter treatment. Pre-existing conditions — illnesses you had before enrolling — are often excluded for a set period, commonly 12 months, though some policies waive this if you enroll within 30 days of starting a job.

Mental health conditions like depression and anxiety are covered under most modern policies, though some limit how long you can collect benefits for mental health alone — for example, 24 months instead of the full benefit period. Pregnancy and childbirth complications are covered, but routine pregnancy itself is not considered a disability.

Employer plans versus individual policies

Most people with long-term disability have it through their employer. The employer pays part or all of the premium, making it cheaper than buying an individual policy. Employer plans are also simpler to obtain — no medical underwriting or health questions — because the risk is spread across many employees.

Individual policies require you to answer detailed health questions and sometimes undergo a medical exam. They cost more per month but belong to you and do not disappear if you change jobs. Self-employed people and those whose employers do not offer coverage often buy individual policies, though the cost can be substantial — sometimes $100 to $300 per month depending on your age, health, and benefit amount.

Some professional associations — for accountants, lawyers, nurses — offer group long-term disability at rates between employer and individual policies. If your employer does not offer coverage, check whether your profession has an association plan available.

How to file a claim and what the insurer will ask for

To file a claim, contact your insurance company or your employer's benefits administrator and request a claim form. You will need to provide your doctor's statement describing your condition, when it began, why you cannot work, and the expected duration. The insurer may also request your job description to confirm that your condition truly prevents you from doing that work.

The insurance company will review your medical records and may request an independent medical examination by a doctor they choose. This is standard practice and does not mean they doubt you — it is how they verify the claim. The review process typically takes two to four weeks, though complex cases take longer.

Once approved, you receive monthly payments. The insurer will ask for periodic updates — usually annual medical reports — to confirm you remain unable to work. If you begin working part-time or your condition improves, you must report it. Some policies offer a residual benefit that pays a reduced amount if you return to work part-time, so you are not penalized for earning some income during recovery.

The tax implications of disability benefits

Whether your long-term disability benefit is taxable depends on who paid the premiums. If your employer paid the full premium, the benefits you receive are taxable income and you will owe federal and state income tax on them. If you paid the premiums with after-tax dollars, the benefits are tax-free. If you and your employer split the premium, a portion of the benefit is taxable and a portion is not.

Your insurance company will send you a 1099-R form showing how much you received and how much is taxable. Set aside money for taxes or make quarterly estimated tax payments so you do not face a large bill at tax time. This is especially important if your disability benefit is your only income — it may seem like a full paycheck, but a portion will go to taxes.

Coordination of benefits and offset clauses

Many long-term disability policies include an offset clause that reduces your benefit by the amount you receive from other sources. If you are also collecting workers' compensation, Social Security Disability Insurance (SSDI), or a settlement from a lawsuit, your long-term disability payment will be reduced by that amount.

Some policies offset only certain benefits. For example, a policy might offset SSDI but not workers' compensation, or it might offset a lawsuit settlement but not unemployment benefits. Read your policy document carefully to understand which benefits trigger an offset.

This matters when you are deciding whether to file for SSDI while on long-term disability. SSDI can take years to approve, but once it starts, your long-term disability payment will drop by the SSDI amount. Some people delay filing for SSDI to keep their long-term disability payment higher, while others file immediately because SSDI is permanent and long-term disability eventually ends.

When your benefits end and what happens next

Long-term disability benefits end when one of these occurs: you return to work, you reach the end of the benefit period (often age 65), you reach the maximum number of months the policy covers, or you no longer meet the definition of disability in your policy.

The definition of disability matters here. Early in your claim, "disability" usually means you cannot do your own job. After two years, many policies switch to a stricter definition: you cannot do any job you are reasonably suited for by education and experience. This is called the "own occupation" versus "any occupation" definition. If you cannot be a surgeon but could work as a consultant, the insurer may stop your benefit under the stricter definition.

Before your benefits end, contact your insurer to understand your options. Some people transition to part-time work while still receiving a reduced residual benefit. Others explore vocational rehabilitation programs that the insurer may fund to help you return to work. If you are nearing the end of benefits and still unable to work, you may need to file for SSDI or explore other income sources.

Frequently Asked Questions

Can I get long-term disability if I am self-employed?

Yes, you can buy an individual long-term disability policy as a self-employed person, though it costs more than employer coverage and requires medical underwriting. Some professional associations offer group policies to members. The benefit is typically based on your average income over the past two years, so you will need tax returns to prove your earnings.

What happens if I disagree with the insurer's decision to deny my claim?

You have the right to appeal. Request a written explanation of why the claim was denied, gather additional medical evidence, and submit a formal appeal within the timeframe stated in your policy — usually 30 to 60 days. If the appeal is denied, you can file a complaint with your state's insurance commissioner or pursue a lawsuit, though this is expensive and time-consuming.

Can I lose my long-term disability coverage if I change jobs?

If your coverage is through your employer, it typically ends when you leave the job, though you may have the option to convert to an individual policy within 30 days. If you buy an individual policy, it stays with you regardless of employment changes. Some employers offer portability, allowing you to keep coverage if you leave, but this is less common.

Does long-term disability cover me if I cannot work due to depression or anxiety?

Most modern policies cover mental health conditions, but some limit the benefit period for mental health claims to 24 months instead of the full term. A few older policies exclude mental health entirely. Check your policy document or ask your benefits administrator what mental health coverage you have before you need it.

What if I recover partway through my benefit period and want to return to work?

Tell your insurer and employer immediately. Some policies offer a residual benefit that pays a reduced amount if you work part-time, so you are not penalized for earning income. If you return to full-time work, benefits stop, but you may be able to re-enroll in the plan later if you become disabled again, depending on your policy terms.