Long-term Disability Insurance (LTD) is insurance coverage that protects your income in the event you become disabled because of an accident or illness and are unable to work. Disability insurance will pay your benefits, even if you receive workers compensation, which only pays if you are injured at work.
Although many employers offer short-term disability insurance, fewer offer long-term coverage and often the LTD policies offered by an employer do not provide the coverage that individual LTD policies will provide. In almost every case, the major long-term disability insurers also offer a wide range of riders that can be used to broaden your coverage and to design a plan specific to your needs and your monthly budget.
Long-Term Disability Insurance is especially important for individuals who are self-employed and do not have access to group coverage. Think about how financially devastating it would be for you or your family if you were to become disabled for a year or more and unable to work and earn an income. This is when long-term disability insurance can save the day.
Why Buy Long-Term Disability Insurance?
In today’s economy, very few individuals or family have the resources they could draw on if the primary earner were to lose their income for a month or more, much less a year or more. In fact, according to the Council for Disability Awareness, only about 48% of adults in the U.S. indicate they have saved enough to pay three months of living expenses (rent, house payment, groceries, auto payment, etc) if they became injured or ill and were unable work and earn a living. Even more disturbing is that about half of the adults in the U.S. indicate that they would not be able to cover an unexpected bill for $400 unless they used a credit card or borrowed the money.
Regretfully, even though you are probably paying into Social Security, getting your case approved and getting benefits can easily take more than three months (or much longer, in most cases) if it is approved at all. And it’s important to note that Social Security Disability is based on “any occupation” not “own occupation.” This simply means that if you can do any work at all, you’ll likely not qualify for Social Security Disability benefits.
Although there are many insurance carriers that offer long-term disability insurance, MassMutual is one of the few carriers that stands out as among the best. The company continually earns top ratings from the insurance rating services and has established itself as one of the premier long-term disability insurance providers.
The company not only offers some of the finest insurance products available, they are also a leader in providing information about each type and whether your need is sufficient to justify your purchase. Even if your employer provides disability coverage, it’ll likely fall short of your specific needs if the worst happens and you are out of work for years rather than weeks.
Ratings and Financial Stability Matters
Certainly, every policyholder wants to have peace of mind knowing that their premiums are supporting a policy that is provided by a company who has consistently ranked very high with rating services and indicate that the company can meet all its obligations in the long term.
MassMutual continues to earn exceptional ratings year after year:
A.M. Best Company
Moody’s Investors Service
Standard and Poor’s
5 Critical Factors when Shopping Long-Term Disability Insurance from MassMutual
Unless you have experience in purchasing long-term disability insurance, you’ll need to understand the most important factors and what to look for when you decide to purchase coverage.
When am I considered disabled?
This is determined by the type of coverage you purchase. We always recommend accepting “own occupation” coverage only. This means that the insurer will consider you disabled when you are unable to perform the tasks required for your own occupation, not any just any occupation.
How long do I have to wait to get benefits?
Once you’ve filed a claim and have satisfied the definition of disability stated in your policy, your benefits will begin once you have exhausted your waiting period (elimination period) that you select when you purchase your policy. Certainly, a shorter waiting period is preferred by most applicants but the longer the waiting period, the lower your premium. Your financial situation will certainly have the greatest impact on the elimination period you choose.
How long can I collect benefits?
When you begin working with your insurance broker, your broker will explain the different benefit periods and how each will affect your monthly premium. Typically you’ll have a choice of 2 years, 5 years, and to age 65 or age 67. The shorter the benefit period, the lower your monthly premium will be. Your monthly benefit will be paid up to the benefit period you selected as long as you remain disabled.
How much coverage should I buy?
The amount of insurance you should purchase is typically based on your monthly household expenses but many applicants will ask for the maximum benefit which is usually about somewhere between 50% and 60% of your income.
What is most important?
We recommend to every applicant that they demand the following things in their policy:
- Purchase own occupation coverage only.
- Make certain your policy in noncancellable which prevents the insurer from canceling your policy for any reason as long as you pay the premiums.
- Always verify that the insurance company you select cannot increase the premiums for your coverage unless you agree to a guaranteed schedule of increases.
- Always choose a policy that offers residual coverage. This means the insurer will continue to pay out proportional benefits after you return to work and your income is restored to where it was when you became disabled.
Before You Decide
Finally, before you decide, take a look at the Disability Insurance Education Page at Protect Your Income.com. This page contains the relevant information that can help you get a better understanding of long-term disability insurance and why you seriously consider purchasing it.