The basics about long-term disability insurance

Long-term disability provides a safety net for people unable to work for long periods of time due to debilitating illnesses, severe injuries or a sudden accident. Many families find themselves at a crossroads in such situations because they face financial ruin without the earnings of a regular wage-earner.

More than 60% of personal bankruptcies are attributed to medical problems. Such a statistic exemplifies the importance of long-term disability insurance. A flurry of questions usually surface when a person and his or her family face financial challenges and seek long-term disability benefits. We hope to answer some of them for you.

Majority of claims due to illnesses

If you find yourself in this position and determine that you need long-term disability insurance, here are some crucial things to know:

  • Long-term disability insurance typically pays 40% to 60% of your current pre-tax earnings. If looking for an individual policy through a private insurer, ideally, look for one that provides an amount closer to the 60% range
  • According to TMA Insurance Trust, roughly 90% of all disabilities are due to illnesses and not accidents. This list may include arthritis, back pain, heart ailments, cancer, asthma, multiple sclerosis, depression and lupus.
  • Determine whether your employer offers long-term disability insurance. If they do, that is the sign of a solid employer. According to the U.S. Bureau of Labor Statistics, an estimated 34% of workers in the private industry had access to long-term disability plans.
  • If the benefit amount offered through your employer is not enough, seek supplemental coverage from a private insurer.
  • If you choose to purchase your own policy, the benefits will not be taxed. However, if the employer pays the insurance premiums, the benefits are taxable.
  • Typically, most long-term disability policies require a waiting period of at least 90 days. Another thing to know: Individual policies often pay the benefits at the end of the month. So if you add that month to the 90-day waiting period, you essentially wait 120 days for that first payment.
  • The average disability claim in group insurance is nearly 35 months, while the average disability claim for an individual policy is nearly 32 months.
  • If the insurance company denies your claim, immediately file an appeal. Enlist the help of a skilled attorney.

You did not ask for health-related complications to disrupt your life. However, now that they have surfaced, you need guidance on what to do. Alan C. Olson and Associates has helped many people facing your dilemma.

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