Empower Blog

May 14, 2021

Why it’s Important to Consider Long-Term Disability Insurance

If you were to ask people what their number one asset is, most might say it’s their home or retirement savings or perhaps investment accounts. Most wouldn’t think of their ability to go to work to be able to provide for their family as their biggest asset. But in reality, a person’s income is worth a significant amount over the course of a lifetime, potentially adding up to millions of dollars.

Income is critical to most peoples’ financial security, but many rarely think about how an illness or accident could put their income at risk. Long-term disability insurance is a type of income protection designed to cover a portion of your income if you’re injured or ill and cannot work for an extended period of time. It also includes permanent disabilities that leave you unable to return to work. Read on to learn more about how long-term disability insurance can help you protect your standard of living.

Who Should Get Long-Term Disability Insurance?

Quite frankly, long-term disability insurance is something everyone should consider. Workers’ livelihoods could change in an instant – and frequently do. Approximately every seven seconds, a working-age American suffers a disabling injury or illness that will last for at least one month, according to the Council for Disability Awareness1.

And it’s not just something you need as you age. In fact, the chance of missing work for three months or longer due to an illness or accident is much higher than most people realize. For example, more than one out of 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, as reported by the Council for Disability Awareness2.

There are other good reasons for having long-term disability insurance sooner rather than later, too. For one, your cost of coverage, or premium, will vary depending on a variety of factors, but generally speaking, the younger you are the more affordable it will be. As you age, premiums increase. In addition, the earlier you start, the more income you’ll be protecting. You want to protect your working years, so it’s a good idea to consider starting sooner to make the most of your coverage.

What Does Long-Term Disability Insurance Cover?

In a nutshell, long-term disability insurance covers you by providing a portion of your income if you are unable to work due to a serious illness or injury for an extended period of time. The specific types of conditions that are covered will be determined based on the policy you select. Common examples include accidents, heart attack, cancer, mental health issues and serious injuries such as fractures, sprains and strains that prevent you from working. Whether the illness or injury is covered may also depend on the nature of your work. For example, you may be able to work an office job with a fractured bone, in which case your coverage may not kick in, but if you work a job requiring physical labor, then the policy may take effect.

While short-term disability insurance can provide coverage for up to 90 days depending on the policy, long-term disability kicks in to provide coverage past that point. Long-term disability policies allow you to select your coverage period, such as 5 years, 10 years, etc., and could provide coverage all the way up until retirement. However, long-term disability insurance does not provide coverage upon the policy holder’s death. The amount of time you have to wait before you get your first check from your long-term disability coverage is called the elimination period and can vary depending on your policy options.

It’s also important to think not only about yourself, but also those who may rely on your income. Having a long-term plan in place can help provide financial peace of mind for both you and your loved ones.

What Should I Look for in a Policy?

When evaluating your long-term disability policy options, consider getting coverage for at least 5 years, or more. You’ll also want to pay attention to the percentage of income replacement offered in light of your overall financial situation. Everyone’s situation is unique, so be sure to work with an advisor when implementing a policy and plan to review it on an annual basis to ensure it’s keeping up with your long-term financial goals.

It’s also worth noting that while some employers offer long-term disability insurance policies, most of these policies only cover about 50-60% of your salary, and this benefit is taxed as ordinary income at claim time. Plus, there’s a good chance an employer-provided policy is not portable, which means if you leave or change jobs, you can’t take it with you. A supplemental policy can help make sure you don’t have a gap in coverage. One way to look at it is while an employer-provided plan may help you pay the bills and keep food on the table, a supplemental policy can help you maintain your current standard of living. A policy outside of an employer generally costs between 1-3% of your annual salary, but the total cost and your monthly premium will vary depending on factors such as your age, location, health, occupation and annual salary.

Dealing with a disability can be scary enough without the extra worry of how you’re going to pay the bills. That’s why protecting your paycheck with the right kind of disability insurance is a critical part of keeping your family and future secure. Working with an Insurance Advisor is a great way to find the right coverage for you and your family. If you’d like to learn more, our Insurance Advisor, Joe Yates, is happy to help you understand your individual situation and the options available to you.

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About the Author
Professional Picture of Joe Yates
Joe Yates

Wealth Management by CommunityAmerica

Joe Yates is a Financial Advisor focused on helping members establish peace of mind by developing a comprehensive financial plan anchored by their goals.

This information is for educational purposes only and should not be considered tax or legal advice. Consult your tax or legal advisor regarding the treatment or long-term disability insurance policy benefits.


Insurance products are offered by CommunityAmerica Financial Solutions, LLC (“CAFS”) in its capacity as an insurance agency and are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve possible loss of principal. CAFS Insurance Advisors are only authorized to offer non-securities insurance products. CAFS is a wholly-owned subsidiary of CommunityAmerica Credit Union. Wealth Management by CommunityAmerica is a marketing name used by CAFS.