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This glossary is available to give you general information about words and terms associated with aging, disability or long-term care. Many sources have been used to compile this list, and there may be more than one "definition" for a word/term. To find a term, select the first letter of the word/term you are seeking. A list of acronyms is also available (links are available throughout this page). Disclaimer: This website has links to many other federal agency and private organizations. You are subject to that site's privacy policy when you leave our site. Reference in this website to any specific commercial products, service, manufacturer, or company does not constitute its endorsement or recommendation by the U.S. Government or HHS. HHS is not responsible for the contents of any "off-site" web page referenced from this server. Long term disability income insurance is designed to protect your income if you cannot work due to illness or injury. Yet, a common misconception about disability income insurance is that its sole purpose is to cover against catastrophic events resulting from accidents. In fact, illnesses like cancer, depression, and multiple sclerosis far more often impact your ability to work and support yourself and your family – 90% of disabilities are caused by illness1. The biggest difference between short term and long term disability insurance is the period of time you’ll receive benefits if you’re unable to work. This period is called the benefit period. As the name indicates, short term disability insurance is intended to cover you for a short period of time following an illness or injury that keeps you out of work. While policies vary, short term disability insurance typically covers you for a term somewhere between 13-26 weeks and can replace anywhere from 40-70% of your income during that benefit period. On the other hand, long term disability is intended to provide benefits for a longer period, and benefit periods for long term disability insurance are usually stated in years: 5, 10, 20, or even until you reach retirement age, depending on your plan. If you have both short term and long term disability policies in place, short term disability will pay you benefits during the waiting period before your long term disability coverage begins, at which point you’ll transition from one policy to the next to receive benefits. The cost of a disability policy – especially an individual policy – can vary greatly based on benefit length and amount, age, gender, occupation, and policy riders. One rule of thumb: expect to pay between 1 to 3 percent of your annual salary. Premiums – the amount you (or your employer) pay for the policy – can be in the range of $25 to $500, again depending on many factors particular to your situation. The benefit of an individual policy usually isn’t taxed (unless paid for with pre-tax dollars); for a group plan if paid in part by your employer, the benefit will be taxable. The long answer is more complicated. We’ll explain below so you better understand what you’re buying. Learn more about cost with our disability income insurance quote tool. Premiums vary based on the length and type of coverage, your health, the benefit amount, and other factors. In this section, we’ll highlight how these factors may determine costs.
And optional factors that vary by person
There are two potential ways to get a disability insurance policy: Your company may offer STD or LTD insurance as part of your employee benefit package. If you’re self-employed you may be able to get disability insurance through a professional association. Either way, group disability insurance can be an excellent choice: Because the company or association is buying for a large group of people, the premium is typically lower than for an individual policy. In addition, your HR department (or the association’s management) will likely have more expertise and leverage to negotiate favorable terms. An added benefit to getting a policy through your employer is that they may also subsidize a portion of the premiums, further lowering your cost. On the other hand, because the company or association is effectively “buying in bulk,” you will probably have less opportunity to tailor the policy to your needs. If the premiums are paid with pre-tax dollars (usually the case with employee benefits) then the income benefit you get down the road will typically be taxed. Finally, if you leave the company or association, in most cases you’ll also lose your coverage. This is typically a long term disability policy you purchase for yourself, so you can tailor it to your needs. As it’s usually paid for with after-tax dollars, the replacement income it provides is also tax-free. It’s most often bought through a financial professional; if you don’t have one, or if that person doesn’t have much experience with disability insurance, a Guardian financial professional can give you a disability insurance quote. Curious about the role of disability insurance in financial wellness? Learn more
A graded premium policy lets you pay a lower amount initially, with increases according to a pre-determined, guaranteed schedule. You may also have the option to convert to a “level” premium. Level premium is a fixed premium that never increases. Should I buy individual disability insurance in addition to the group plan offered by my employer?If you are looking for more protection, you should consider adding extra coverage on top of your group long term or individual disability plan.6 Supplemental disability insurance available through an employer can be a great add-on for employees and individuals who wish to protect a greater percentage of their income, bonuses or commissions. Supplemental disability insurance helps cover the difference between what you’ll receive from your current group long-term disability policy and what you’d need to maintain your current lifestyle if you’re unable to work due to injury or illness. How much does long-term disability insurance cost per month?The cost of a disability policy – especially an individual policy – can vary greatly based on benefit length and amount, age, gender, occupation, and riders, but expect to pay between 1 to 3 percent of your annual salary. That means a person making $100,000 can expect to pay between $83 - $250 per month. |