Do you really need long-term disability (LTD) insurance?

What if you were one of the people who unexpectedly couldn’t work due to an illness or injury? How would you replace your income?

Long-term disability (LTD) insurance was created to help replace a portion of your income when you can’t work due to an illness or injury. It’s likely that most people don’t think they are ever going to need it.

Part of financial wellness is protecting what you have. For most everyone, your income is your lifeline. Sure, emergency savings could cover a few months. But what if you are one of the many diagnosed with a serious illness that keeps you out of the workforce for an extended period of time?

Simply put, LTD replaces a portion of your paycheck when you’re injured or sick, and unable to work. Depending on the type of insurance — like short-term, which replaces a portion of lost wages when you are out of work a shorter period of time, typically a few weeks to months. LTD coverage, where after you meet certain conditions to be eligible for benefits like completing a waiting period, benefits are paid for the duration of your medical condition to the maximum duration allowed by your plan or until you reach Social Security Normal Retirement Age.

How would you replace your income?¹

• In 2024, it was reported that around 46% of U.S. adults say they need some sort of disability insurance.
• More than one in four of today’s 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach retirement age.

LTD is intended to help you:

• Protect a portion of your paycheck
• Continue to provide for your family
• Avoid tapping into retirement savings or other assets to cover basic living expenses
• Avoid going into debt to pay bills
• Reduce overall stress and stay focused on getting better
• Get back to work sooner

It’s usually offered through employers, and the premiums may be paid by you, your employer or both.

If your employer doesn’t offer LTD insurance, or you’re self-employed, you can still buy a policy however, a medical exam may be required, in which case the insurance company will need to approve your application in order to issue coverage. After your coverage is issued, you may also be subject to exclusions or limitations that would prevent you from getting a benefit if your disability is caused by, contributed to or resulting from specific situations, such as being legally intoxicated. You will want to review your plan documents carefully to understand the provisions of your coverage.

Disability insurance benefits are paid to you directly (usually between 50% and 70% of your salary) so you can use the money as you see fit.

With this kind of protection in place, you will have coverage that provides benefits and access to resources during a difficult time.