IN THEIR SHOES

Long-term disability (LTD) insurance is another kind of insurance that can protect you if a catastrophe happens that prevents you from being able to earn a living. Depending on the kind of work you do, an injury, an illness, or certain chronic conditions could cut off your income for a long time or even permanently. These policies will usually pay 60 to 70 percent of your current salary in the event of such a disability.
Suppose you do heavy labor and are laid up with a back injury, or you are a psychotherapist and lose your speech because of a stroke. When this kind of disaster strikes, an LTD policy can really save the day. You may think that you do not need one because you are protected by workers’ compensation. Remember that workers’ compensation covers you only if you are injured while performing your job. LTD insurance will pay for you whether you hurt yourself on the job or at home or on vacation.
In many ways this insurance is every bit as complicated in terms of finding a good policy as long-term-care insurance is. To find a good carrier, you might want to ask many of the same questions I listed under LTC insurance.
In looking for a good policy, here are some elements that you need to understand and some questions to ask:
What percentage of income will the policy pay? Most policies pay a percentage of what you are earning; typically they ii range from 60 to 90 percent of your current salary. The higher the percentage, usually, the more expensive it is. Many companies have a cap on how much they will pay monthly; for large employers it is usually $5,000 a month.
4l How long is my elimination or waiting period? Just as with LTC policies, this is how long you will have to wait till the company starts to pay. A normal waiting period is three to six months.
Till what age will they pay? Most policies pay only until you are sixty-five years of age.
Do you cover me if I am disabled because of illness as well as in an accident? The answer should be “Yes.”
What if I can only work part-time because of my disability? You want a policy that will pay according to how much you can and cannot work. So if you can only work part-time, they should pay you a portion of your disability payments. The term for this is residual benefits.
H Is the policy guaranteed renewable? Here you want to hear absolutely “Yes”—you do not want to have to qualify each and every year for benefits.
1 Is it “owner’s occ” or “any occ”? Do you feel as though I just started talking a different language? This question is very important. What it asks is under what circumstances the company will pay you. Will it pay you only if you cannot perform any job whatsoever, or will it pay if you cannot perform your job? Suppose you’re a musician and you lose some of your hearing. You might be able to function and sell pencils on the street corner, so you are not necessarily “disabled,” but you can’t do your job. If you have an “any 0cc” disability policy, it will pay you only if you cannot perform any occupation, so you would not be able to collect benefits for your loss of hearing. If your policy were “owner’s 0cc,” it would pay as long as you, the policy owner, cannot perform your own occupation.