How It Works

Everything you need to know about long term disability rates and coverage is included below. Read on to learn about the different kinds of disability insurance and what benefits they offer.

About Disability Income Insurance

If you cannot work because you are injured or sick, long term disability insurance will pay benefits to help replace your lost income. Certain policies may pay partial benefits if you can only work part time because of your illness or injury. A long term disability policy will detail the amount of benefits you'll receive, how soon you will receive benefits after you become disabled, and how long you will receive benefits. Typically, a long term disability insurance policy replaces 50%-70% of your income.

The amount of time you receive LTD insurance benefits will depend on whether illness or accident lead to the disability. Policyholders typically receive LTD benefits on a monthly basis for a fixed period of time, such as two years, five years, until age 65, or for the rest of the insured's life as long as the disability persists. The benefits are issued after a waiting period, which can range from one week to several years. The longer your waiting period, the lower your long term disability rates will be.

Types of LTD Policies

Long term disability rates can apply to two very different types of policies: guaranteed renewable and noncancelable. With both types of LTD policies, the insurer cannot refuse to renew or cancel the coverage as long as you pay your premiums on time. Here is how the two disability income insurance policies differ:

• Noncancelable. The long term disability rates of the policy cannot be raised higher than the amount specified in the policy, and benefits cannot be reduced as long as the premiums are paid on time.
• Guaranteed renewable. The policyholder has the right to renew the coverage for the same benefits, but the insurance carrier can raise the premiums as long as the long term disability rates are also raised for all other similar policyholders. Guaranteed renewable policies tend to have lower LTD rates initially, but premiums can increase substantially over time.

Policy Riders

Most insurance carriers offer a variety of optional policy benefits, called riders, to enhance traditional long term disability insurance. Usually, adding these riders to a policy will cause your long term disability rates to rise. A summary of a few important LTD insurance riders is included below.

• Cost of living adjustments. This rider helps your disability benefits keep up with inflation as the cost of living rises each year after you're disabled.
• Future purchase option. This rider gives you the option to buy more long term disability insurance as your income grows without having to provide additional proof of medical insurability.