Key takeaways
Long term disability (LTD) insurance replaces a portion of your income if an illness or injury prevents you from working for an extended period, regardless of whether the cause is work-related.
Disabilities are more common than many people realize, with over one in four 20‑year‑olds likely to become disabled before retirement.1
Benefits are paid directly to you, can generally be used for any expense, and typically provide more income Social Security Disability Insurance, which is difficult to be approved for.
Policies can replace up to about 60% of pre‑tax income after an elimination period (commonly 3-6 months), with benefit that may last 5, 10, or 20 years or even up to retirement.
Coverage can be obtained through employer group plans, individually purchased policies, or a combination of both.
What is long term disability insurance?
LTD an insurance contract that helps protect your ability to earn a living. It’s designed to replace a portion of your income if you're unable to work due to a serious injury or illness — whether job-related or not. Policies typically pay monthly benefits equal to 50% to 70% of your pre-disability earnings, and that income can continue for several years — or even until retirement age — depending on the terms of your coverage.
LTD coverage is more important than you may think
About 1 in 4 of today’s 20 year-olds are expected to become disabled before they reach retirement age.2 And contrary to what many people think, most disability isn’t caused by on-the-job accidents: according to the Council for Disability Awareness some of the most common reasons for a long-term disability claim include things like cancer, pregnancy, circulatory, musculoskeletal, and mental health issues.3 When a health problem isn’t directly work related, it’s not covered by Workers’ Compensation. That’s why long term disability insurance protection is key to helping ensure your finances permanently damaged by illness or injury.
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How long term disability insurance works
If a serious illness or injury occurs — and it’s likely to keep from working for an extended time — you submit a claim to your insurance carrier, supported by medical records and relevant test results. Once the claim is reviewed and approved, there’s an elimination (or waiting) period before LTD benefit payments start, often ranging from 90 days to 6 months, depending on the plan. After that, the insurer begins paying monthly benefits directly to you, and — just like a paycheck — you can use those funds to cover living expenses or in any way you see fit.
Your LTD benefit is designed to replace a percentage of your pre-disability income, commonly up to about 60% of your pre-tax earnings, though many plans fall in the 50–70% range. For example, if you earned a $100,000 salary before becoming disabled (about $8,333 per month), a 60% LTD benefit would provide roughly $5,000 per month in benefits while you remain eligible. The “benefit period,” or maximum duration of payments, is chosen up front when you apply for coverage. It may be limited to a fixed period such as two, five or ten years; or payments could continue until a designated retirement age, such as 65 or 67 (or until you recover from your disability). As you might expect, a longer benefit period costs more than a shorter one.
To qualify for (and continue receiving) benefits, you have to meet the policy’s “definition of disability.” That definition is critical, and most LTD contracts use either an “own-occupation” or “any-occupation” standard — or a hybrid that shifts over time:
Under an own-occupation definition, you are considered disabled if you cannot perform the material duties of your regular job or specialty, even if you could theoretically do some other work. While
With an any-occupation definition, you must be unable to work in any job that reasonably fits your education, training, or experience.
Many group LTD policies now use a hybrid approach where (for example) the first 24 months are paid under an own-occupation standard and then switch to an any-occupation standard. At that point, claims are re-evaluated and people either transition back to work or must meet the stricter any-occupation criteria to keep benefits. Disability insurers (including Guardian) offer these hybrid definitions because it can provide more robust protection than a strict any-occupation plan at a lower cost compared to a pure own-occupation plan.
Are long term disability benefits taxable?
It depends on how you get coverage, and how it’s paid for. Many employees get LTD through work. If your employer pays the premiums (or you pay for the plan with pre-tax dollars), benefits are generally treated as taxable income.
However, if you purchase an individual disability policy (IDI) and pay premiums with after-tax dollars, (which is how these policies are typically paid for) then the benefits you receive are generally tax-free. It’s important to keep this in mind as you get coverage: a policy that replaces 60% of income tax-free may net you an amount that’s pretty close to your current take-home pay; but if those benefits are taxed, you could net significantly less. That’s why it’s a good idea to consult with a tax professional who is familiar with the specifics of your situation as you’re getting coverage.
Short term vs. long term disability insurance
There’s another type of coverage — short-term disability insurance or STD — that is designed for more common, short-lived illnesses and injuries that keep you out of work for weeks or a few months, rather than years. STD benefits start quickly — often after a waiting period of 7–14 days — and the maximum benefit period is usually about 3–6 months (and never more than one year). As noted, LTD typically has a much longer elimination period, so STD can help fill the gap between your last paycheck and the start of LTD benefits, so you don’t have to deplete your savings (or borrow money) just to get by.
STD is also simpler than LTD from a qualifying disability standpoint: It generally does not distinguish between “own occupation” and “any occupation” because it covers an immediate, obvious recovery period where you clearly can’t perform your job — think immediate post-surgery, childbirth, or a broken leg that physically prevents you from doing your job.
However, if a more serious, longer-lasting disability occurs the two can complement each other quite well: Soon after your disability begins, STD benefits replace a portion of your income for the first 3–6 months, while your LTD elimination period is “running in the background.” Ideally, STD payments from your insurance provider end just as the LTD waiting period is satisfied, and those benefits continue for years or even until retirement, according to the terms of your policy.
What happens when you’re ready to return to work?
The specific process varies somewhat from one insurer to the next, but with Guardian a claims manager, nurse case manager, and vocational rehabilitation specialist are assigned to your case when you make a claim, in order to give you the best chance of resuming employment. Together, this team of specialists will help to support you as you recover and help assess when and if you can return to work. But the decision doesn’t always come down to a straight yes or no: for example, if you can resume working, but need to change job roles to accommodate physical limitations, this team will also help you retrain for a new job and increase your chances for a successful return to work.
Partial benefits can provide added support
Depending on the terms of your policy, you may also qualify for partial (also called residual) LTD benefits that are designed to support you when you are not completely disabled, but you can’t work at your full capacity, and earn less as a result of your condition. Instead of requiring you to be totally out of work, these provisions let you continue working in a reduced schedule or in a lower-paying role while still receiving a partial LTD benefit to help make up some of the lost income. This structure can help you get back on your feet by supporting a gradual return to work or continued part-time work, rather than forcing an “all-or-nothing” choice between working full time with no benefits or not working at all to qualify for total disability benefits.
What does long term disability insurance cost?
Coverage you get through your employer will generally cost less, whereas with an individual policy you pay the full premium cost, but coverage stays with you if you change jobs. A common guideline: Expect a strong plan to cost between 1–3% of your annual salary.4 So for example, if you earn $100,000, expect to pay roughly $85–$250/month, or $1,000–$3,000/year. But that’s a rough estimate — several factors will impact your actual cost, including:
Age: As with life insurance, younger applicants almost always pay lower premiums.
Health history: Pre-existing conditions and family health history issues will raise cost.
Benefit amount: The higher the level of income replacement, the greater the cost.
Benefit period: A policy that pays through Social Security retirement age will cost more than coverage for fewer years.
Elimination period: This is the time after becoming disabled until you start to receive payment; a longer elimination period can help lower premiums.
Definition of disability: As we noted before, own-occupation coverage costs more than an any-occupation coverage.
As you’re purchasing a policy (or more literally, defining the terms of your LTD insurance contract) there are a number of tradeoffs you can make to help control costs and tailor an individual policy to your needs. For example, a hybrid definition of disability can split the cost difference between own-occupation and any-occupation definition. Or, a longer elimination period, as much as a full year, can significantly reduce premiums — and can be an excellent choice for those with sufficient savings or liquid assets.
Deciding if an LTD policy is worth it
Long term disability coverage can be an important investment in your family’s financial future, but the cost is not insignificant. And frankly, not everyone needs it. For example, if your spouse can support you if you become disabled, or you have significant savings and assets to fall back on — enough to last for years — then the money you would otherwise spend on LTD premiums may be put to better use elsewhere.
On the other hand, if you're the primary earner, don't have a spouse's income to fall back on, and don’t have other savings or assets that can be readily turned into income, then you should think about how to protect your finances and lifestyle. You probably don’t want to count on Social Security Disability Insurance (SSDI): the application process is notably difficult and time-consuming, with only 20% of initial applications approved.5 And even if benefits are awarded, they may not be enough for your needs — the average SSDI disability payment in 2026 is only 1,630/month.6
An LTD policy from a reputable provider can provide much more monthly income, in a way that’s far easier to access when you need it most. Finally, if you work in a specialized, highly-compensated profession — and wouldn’t earn as much if you couldn’t practice your specialty — you should look at getting an LTD policy that protects your earning power with a strong, own-occupation definition of disability.
How to get long term disability insurance
1. Through your workplace
A long-term individual disability policy can be a powerful tool to help ensure financial well-being. That’s why many employers choose to support their employees by offering group disability insurance benefits, sometimes at no cost. Other employer offer it as an optional benefit, giving employees the chance to purchase a policy at a discounted group rate. Contact your HR department or supervisor to see what options, if any, are available. to you.
2. Individual disability insurance
If you’re self-employed, your employer doesn’t offer disability insurance, or you want to supplement the policy your employers does offer, you can apply for an individual disability policy. Purchasing an individual policy gives you more flexibility to tailor policy options for your unique needs. But it's important to work with a financial advisor who will learn about your situation and provide in-depth information about your options. If you have someone you trust, talk to them about your disability needs. Otherwise, Guardian can connect you with a local financial advisor who will listen to your needs, tell you about the best ways to meet those needs within your budget, then help you decide.
Frequently asked questions about long term disability insurance
A wide range of medical conditions can qualify for LTD as long as they prevent you from performing the duties of your job (or any job, depending on the terms of your policy). Qualifying conditions can include illnesses such as cancer, musculoskeletal disorders, cardiovascular disease, neurological conditions like multiple sclerosis or Parkinson’s, serious mental health disorders, and any other diagnosable condition that limits your ability to work for an extended time.
There is no fixed “stop” age; many people keep LTD until they are close to traditional retirement age (often when benefits would naturally end, such as around age 65), or until they have enough assets that a loss of income would no longer be financially disruptive.
Yes, an insurer or plan can deny LTD benefits if you do not meet the policy’s definition of disability, if documentation is insufficient, or if exclusions and limitations (such as certain pre-existing conditions) apply. However, you should have appeal rights if you believe the denial is incorrect, but that process could delay your benefits.
Typical, uncomplicated pregnancy and routine postpartum recovery are temporary events handled by short-term disability coverage. LTD eligibility generally comes into play only if pregnancy-related complications, postpartum complications, or associated conditions (for example, severe postpartum depression or pregnancy-exacerbated chronic illness) prevent you from working long enough to satisfy the longer LTD elimination period.