LTD has gotten more expensive and more resrictive in the past 5-10 years ’cause people are USING it much more than they ever did. Back in the day, companies were more liberal with sick time and allowed employees to roll it over; then if after 20 years you needed surgery, you could use time off as needed. Now-a-days find three things wrong with the last sentence.

Find a agent that writes through several companies. Control the premium on a LTD policy by taking a higher deductible (the waiting period, tying this in with your emergency fund) and the length of the policy (usually two years..after which you’re eligable for social security disability); make sure the agent explains the restrictions and provisions of the policy. Good luck.

What good does it do you if it takes a couple months to kick in, excludes a bunch of stuff, and doesn’t even end up paying enough to cover your basic bills if you do in fact actually receive the benefit?

When I got the policy, it took me an hour to figure out that all the insurer was going to pay was a marginal amount of money because it excluded any Social Security Disability payments and — get this — it wouldn’t pay me anything unless I first qualified for SSD incapacity-wise (hence, you wind up having a claim with the insurer only if you’re so disabled that you actually qualify for SSD, and that’s REALLY disabled!).

Worse, the policy would also exclude “FERS” payments (basically a federal employee retirement plan that will start paying early if you’re effectively retired by an SSD-level disability) and any other third-party sources of income (unemployment, money from the person who rammed you with their car and thus disabled you, for example).

To be clear: The policy permitted the insurer to add all of those layers of payments together, then subtract the total from the 60% of income that it offered to replace. I figured that I would have wound up with just a marginal layer of economic benefit for my $800. I actually got one of the insurer’s lawyers on the phone to confirm all this and he agreed that it wasn’t a good deal.

On top of all that, the policy was hard to read — and I’m a lawyer!

My point: read the policy thoroughly, especially (1) it’s definition of how disabled you must be to get any payments at all; and (2) how much of other income, be it from SSD or welfare, an employer-benefit, etc, is excluded. Then ask yourself if you would pay $800/year, for example, for $10,000/year worth of coverage (I pay that much for $1 million of auto liability coverage, though I concede that LTD is a different animal).

Anyway, I’m convinced that very few people read these policies (right, it doesn’t benefit insurers to make them easy to read), and I see plenty of lawyers get rich when disappointed insureds sue their insurers over the holes cut into the Swiss cheese — precisely what some of these policies are.

You may be able to get a supplemental policy like Aflac, but I bet it will be difficult to get another disability policy. Or, the cost will be very prohibitive. You may be better off building a larger emergency fund – like 12 months. If you need more than 60% of your pay and 12 months of emergency monies, then you are probably suffering a very severe disability and social security should kick in.

The other thing about getting LT outside of the company is the taxation of the benefits. Most of the time LT disability is paid pre-tax by the company and as a result the benefits are taxable. If you buy LT disability with after tax dollars the benefit is not taxable which I think is a worthwhile tradeoff.