Doing Disability Insurance The Right Way

Doing Long Term Disability Insurance The Right Way

Long-Term Disability Insurance

Doing Long-Term Disability Insurance The Right Way

Long-term disability insurance is an insurance that almost all working adults need but often overlook.

Why is long-term disability insurance often overlooked?

I suspect long-term disability insurance is overlooked for two main reasons. The first being denial and the second reason is the cost of long-term disability insurance.

Long-Term Disability Insurance Policy

The language of a private long-term disability insurance policies can appear overwhelming.

The terms and conditions used in a long-term disability insurance policy may seem perplexed and it is easy to understand that you may have questions about the policy.

Please, ask questions and then more questions. If you are purchasing a private long-term disability insurance policy you need to know what type of long-term disability insurance policy you are purchasing.

If you are purchasing a long-term disability insurance policy through your employer then you should direct your questions to your company’s Human Resource department questions.

The Social Security Administration publishes disability statistics that scream why working adults need a long-term disability insurance policy.

The Social Security Administration’s Statistics On Begin Disabled

According to The Social Security Administration in 2014, it states that 1 out of 4 workers over the age of 20 years will become disabled for some period of time before they retire.2.

Surprising, only a small percentage of disabilities are caused by an accident. A large majority of disabilities occur from different illnesses.

Unfortunately, I am part of the large majority that has become disabled due to illness.

The American Council of Life Insurers and the Insurance Institute of America publishes guides on how to purchase long-term disability insurance.

I have learned an important lesson about the alarming chances of becoming a Long Term Disability Statistic; “Private Disability Insurance May Be Expensive But It’s Priceless.”

What Is Private Long Term Disability Insurance?

Private long-term disability insurance is a necessity if you are a working adult that depends on their paycheck to live.

Long-term private disability insurance allows you to replace part of your income if you were to become disabled.

Generally, you can purchase long-term disability insurance coverage that will replace 50 – 75% of your earned income.

Here are some facts you should know about long-term disability insurance coverage:

  • There is usually a waiting period before you are able to receive long-term disability insurance benefits payments. A waiting period means you have to wait a set period of time after the disability occurs.
  • Long-term disability insurance generally provides you with a monthly payment and does not cover specific expenses.
  • Long-term disability insurance payments continue for the duration of your disability or until the stated time limit on the policy has expired.

Is Disability Insurance Taxable?

Disability insurance is taxable, sometimes.

If you purchase long-term disability insurance through a group disability insurance plan at your work and your premiums are deducted from your paycheck then your disability insurance benefits are taxable.

If you pay for long-term disability insurance with personal funds, eg. check then your long-term disability benefits are not taxable.

Social Security Disability Income from the Social Security Administration is taxable. 

If you are able to receive Social Security Disability Insurance your monthly disability benefits are based on your lifetime average earnings covered by Social Security.

How Does Social Security Administration Define A Disability?

The Social Security Administration has an extreme definition they use to define if you are eligible for Social Security Disability Insurance:

The definition of disability under Social Security is different from other private disability insurance programs.

Social Security Administration (SSDI) pays only for total disability.

No benefits are payable for partial disability or for short-term disability.

“Disability” under Social Security is based on your inability to work.

The following is how Social Security defines a disability:

You cannot do work that you did before;

  • We decide that you cannot adjust to other work because of your medical condition(s); and
  • Your disability has lasted or is expected to last for at least one year or to result in death.

This is a strict definition of disability.

Social Security program rules assume that working families have access to other resources to provide support during periods of short-term disabilities, including workers’ compensation, insurance, savings, and investments. 1.

Private Long-Term Disability Insurance Verus Social Security Disability Insurance

Private Long-Term Disability Insurance policies offer the option to receive long-term disability insurance benefits if you are unable to do the same type of job. Whereas, Social Security Disability Insurance is available if your disability has lasted or is expected to last for at least one year or to result in death.

Here is an example; If you were a dental hygienist and your hand was permanently damaged you would receive benefits under a private long-term disability policy with a like job clause.  However, you would be denied long-term disability benefits under the Social Security Administration rules.

From my experience, long-term disability insurance terms, rules, recommendations can seem overwhelming. Our family’s experience with long-term disability insurance is what spearheaded Amazon’s #1 Disability Insurance Business Law Book; HypoGal and Disability Benefits.

HypoGal and Disability Benefits is a book that was written to help guide you through Social Security Disability Insurance process and help you to better understand doing long-term disability insurance.

I hope you find this post, “Doing Long Term Disability Insurance The Right Way” useful.

My Long-Term Disability Insurance Quote: “Disability insurance is expensive but priceless”.


1. The definition used by The Social Security Administration to determine if you are disabled.

2. Social Security Administration states 1 in 4 workers over the age of 20 years will become disabled for over 90 days.

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