Extra support for the long haul.© New Africa/stock.adobe.com, © trekandphoto/stock.adobe.com; Photo illustration Encyclopædia Britannica, IncLosing the ability to work due to an illness or injury can be financially devastating, especially if your income disappears overnight. Without a steady paycheck, it can quickly become a challenge to cover rent, bills, and other essentials.

　　Long-term disability insurance helps protect your income by replacing a portion of your earnings if you’re unable to work for an extended period. It provides financial stability while you recover, ensuring you can meet your expenses even when work isn’t an option.

　　What is long-term disability insurance?Long-term disability insurance replaces a portion of your income if you’re unable to work for an extended period. Unlike workers’ compensation, which is designed to compensate specifically for work-related injuries and illnesses, long-term disability applies regardless of where or how you became disabled.

　　Coverage periods vary by policy, ranging from two years to retirement age. It can also supplement Social Security disability benefits if you qualify.

　　Most policies pay out 50% to 70% of your pre-tax income, though you may be able to increase the amount with a more expensive policy.

　　Eligibility for long-term disability benefitsBefore you receive long-term disability benefits, certain conditions must normally be met:

　　Elimination or waiting period. This is the time between when your disability begins and when benefits kick in. Elimination periods range from 30 days to two years; 90 days is typical. An emergency fund or short-term disability coverage can help bridge the gap.Type of inability to work. Your policy defines what qualifies as a disability. With own-occupation coverage, you receive benefits if your disability or illness prevents you from working in your current occupation, even if you could do another job. With any-occupation coverage, you receive benefits only if you’re unable to work any job.Proof of persistent disability. You generally need medical documentation to confirm that your condition prevents you from working. A residual disability rider allows you to receive partial benefits if you’re able to work reduced hours but can’t work full time.Why Social Security disability benefits aren’t a reliable alternativeSome workers may assume Social Security Disability Insurance (SSDI) can serve as a substitute for long-term disability insurance, but qualifying isn’t easy, and the payments aren’t enough for most individuals to live on.

　　Strict requirements. SSDI only covers disabilities that are expected to last at least 12 months or result in death—temporary injuries don’t qualify.Long wait times. It takes an average of three to six months for an initial decision, and most applications (about 65%) are denied.Appeals take time, too. If it’s denied, reconsidering your claim takes another three to five months, and getting a hearing before a judge can take a year or longer.Mandatory waiting period. Even if your claim is approved, a five-month delay applies before payments begin.Modest payouts. Even if you qualify, SSDI benefits are limited. The maximum monthly payment is $967 for individuals and $1,450 for couples, but many recipients receive less. An individual receiving the maximum benefit would still get less than a full-time worker earning the federal minimum wage ($7.25 an hour as of 2025), who would make $1,256 a month.For short-term or even moderate-length disabilities, SSDI isn’t a reliable safety net. Without long-term disability insurance or other sources of income, workers could be left without financial support for months—or even years.

　　Cost of long-term disability insuranceThe cost of long-term disability insurance depends on several factors. In general, the more coverage you want, the higher your monthly premium will be.

　　Benefit amount. The higher the percentage of income you want covered, the higher your premium. A policy that replaces up to 80% of your pre-tax income will cost significantly more than one that pays 50%.Waiting period. A longer elimination period lowers your premium. A 90-day waiting period costs less than a 30-day one, and opting for six months can reduce costs even further.Benefit period. The duration of your benefits affects cost. A policy that stops after five years costs less than one that continues until retirement age, when Social Security typically starts.Personal factors. Premiums are influenced by your age, gender, and health. Riskier jobs and certain hobbies can also lead to higher costs.Type of disability coverage. Own-occupation policies offer broader protection and tend to cost more than any-occupation policies, which require that you be unable to work in any job.Riders. Add-ons like guaranteed renewal, inflation protection, and residual disability benefits increase costs but can offer valuable protection.Determine how much coverage you need and whether an emergency fund or other resources can help cover expenses. Choose a policy that fits your budget.

　　Taxes and long-term disability benefitsWhether you owe taxes on long-term disability benefits depends on who pays the premiums:

　　Employer-paid long-term disability. If your employer covers the premiums or deducts them pre-tax from your paycheck as part of a cafeteria plan, your benefits are taxable income.Partially employer-paid premiums. If you and your employer split the cost, you owe taxes only on the portion of benefits tied to employer-paid premiums.You pay disability premiums. If you cover the full cost—whether through work or an individual plan—your benefits are tax free.You can purchase an individual policy to supplement an employer-sponsored policy. If you’re concerned your employer’s plan is insufficient or that you’ll lose your coverage if you switch jobs, an individual policy can offer added protection.

　　The bottom lineLong-term disability insurance can provide financial stability if an illness or injury prevents you from working for an extended period. It replaces a portion of your income, helping you cover bills and essential expenses when you’re unable to earn a paycheck.

　　When choosing a policy, consider how much coverage you need, how long you can wait for benefits to begin, and whether your employer’s plan is sufficient. Balance cost and coverage to ensure you have the right protection without overpaying.