What Long-Term Disability Insurance Does
Long-term disability (LTD) insurance is a workplace or individual insurance policy that replaces a portion of your income if you become unable to work due to illness or injury for an extended period—typically longer than 90 days. Unlike SSDI, which is a federal program you pay into through payroll taxes and must prove you cannot work at all, LTD is a contract between you and an insurance company that defines exactly what counts as disabled, how much income it replaces, and for how long.
The key difference: SSDI requires total disability lasting at least 12 months or expected to result in death. LTD can cover partial disability, shorter timelines, and higher income replacement rates, depending on the policy. Many people have both—LTD covers the gap while you wait for SSDI approval, or LTD ends while SSDI continues indefinitely.
LTD is usually offered by your employer as part of a benefits package, though you can also buy individual policies. The cost is often split between employer and employee, or paid entirely by the employer. Some policies are non-taxable (employer-paid premiums mean benefits are tax-free); others are taxable (you paid premiums with after-tax dollars, so benefits are not taxed).
Key Takeaways
- Long-term disability insurance replaces a percentage of your income (typically 50 to 70 percent) if you cannot work for more than 90 days due to illness or injury.
- Most LTD policies have a waiting period (called an elimination period) of 30 to 90 days before benefits begin, during which you use sick leave or short-term disability.
- LTD benefits usually continue until age 65, retirement, or recovery, whichever comes first—not indefinitely like SSDI.
- You must provide medical documentation proving you meet the policy's definition of disability, and the insurance company may require ongoing medical exams or work capacity assessments.
- If you receive LTD and later may have access to for SSDI, the two programs coordinate: SSDI typically reduces your LTD payment so the total does not exceed your pre-disability income.
How the Waiting Period Works
Before LTD benefits start, there is a gap called the elimination period. This is usually 30, 60, or 90 days from the date you stop working. During this time, you are expected to use accrued sick leave, vacation, or short-term disability (STD) if your employer offers it. Only after the elimination period ends does LTD begin paying.
This matters because it means you cannot file for LTD on day one of illness. Your employer's human resources or benefits department will tell you the exact elimination period for your plan. If you have short-term disability, it typically covers the first 3 to 6 months at a higher replacement rate (often 66 percent of salary), then LTD takes over at a lower rate (often 50 to 60 percent).
Some policies allow the elimination period to be satisfied by a combination of paid leave and unpaid time. Others require you to exhaust paid leave first. Read your plan document or ask HR which applies to you.
What the Insurance Company Needs to Approve Your Claim
When you file an LTD claim, the insurance company will ask for medical records, a statement from your doctor, and sometimes your employment history. They want to know: Can you perform the duties of your own job? If not, can you perform any job? The answer depends on your specific policy language.
Some policies use an "own occupation" definition: you are disabled if you cannot do your specific job, even if you could do other work. Others use an "any occupation" definition: you are disabled only if you cannot do any job for which you are reasonably trained. Own-occupation policies are more generous and more expensive. Any-occupation policies are stricter and cheaper.
The insurance company may also request a functional capacity evaluation (FCE)—a medical assessment where a therapist or physician tests your physical and cognitive abilities. They may contact your employer to verify your job duties. If they doubt your claim, they may hire an independent medical examiner to review your case. This process typically takes 2 to 6 weeks, though complex cases take longer.
Income Replacement and Benefit Amounts
LTD policies replace a percentage of your gross or net income, not your full salary. The replacement rate is usually 50 to 70 percent, depending on the plan. If you earn $4,000 per month and your policy replaces 60 percent, your LTD benefit is $2,400 per month.
Most policies also have a maximum monthly benefit—for example, $5,000 or $10,000 per month, regardless of your actual salary. High earners often hit this cap. Some policies also have a minimum benefit, usually $100 to $200 per month, so even if your salary is very low, you receive at least that amount.
The benefit amount is usually fixed when your claim is approved and does not increase with inflation or raises. If you return to work part-time and earn income, many policies reduce your LTD benefit by the amount you earn (called offset). Others allow you to earn up to a certain amount without reduction. Check your plan document for the offset rules.
How LTD Coordinates with SSDI and Other Programs
If you receive LTD and later may have access to for SSDI, the two programs do not pay you the full amount of each. Instead, most LTD policies include a Social Security offset clause. This means your LTD benefit is reduced by the amount of SSDI you receive, so the total of both does not exceed your pre-disability income.
For example: You earn $4,000 per month. Your LTD policy pays 60 percent, or $2,400. You later may have access to for SSDI at $1,800 per month. Your LTD is reduced to $600 per month ($2,400 minus $1,800), so your total monthly income is $2,400. The offset protects the insurance company from paying more than your original income.
Some policies also offset for workers' compensation or other disability benefits. A few do not offset for SSDI, but this is rare and usually only in older or union-negotiated plans. Read your plan document or ask your benefits administrator whether your LTD has an SSDI offset.
When LTD Ends and What Happens Next
LTD benefits continue until one of these events occurs: you recover and return to work, you reach the policy's maximum benefit period (often age 65 or a set number of years), you reach retirement age, or you die. Unlike SSDI, which can continue indefinitely, LTD has a defined end date built into the contract.
When LTD ends, you may transition to SSDI if you have already may have access to, or you may need to explore. Some people receive LTD for 2 to 5 years while waiting for SSDI approval, then switch to SSDI when LTD runs out. Others recover before LTD ends and return to work. A small number exhaust LTD without may have access to for SSDI and have no income replacement.
If you are still disabled when your LTD benefit period ends, you can continue to receive SSDI if you are already approved. If you are not yet approved, you can continue to explore, but you will have no income during the waiting period unless you have other savings or support.
How LTD Differs from SSDI
The two programs serve different purposes and have different rules. LTD is an insurance product designed to bridge the gap between disability and recovery or retirement. SSDI is a federal entitlement based on your work history and tax contributions. Here is how they differ:
| Feature | Long-Term Disability (LTD) | SSDI |
|---|---|---|
| Who pays | Insurance company (funded by employer and/or employee premiums) | Federal government (funded by payroll taxes) |
| Definition of disability | Varies by policy; may be own-occupation or any-occupation | Unable to work at substantial gainful activity for 12+ months or expected to result in death |
| Income replacement | 50–70% of salary, up to a maximum | Fixed amount based on your earnings record; average $1,550/month in 2024 |
| Duration | Until age 65, recovery, or end of benefit period | Until age 66–67 (full retirement age), then converts to retirement benefits |
| Medical review | Insurance company reviews; may request ongoing exams | Social Security reviews; may request continuing disability review (CDR) |
| Work incentives | Varies; some policies allow part-time work with offset | Substantial work incentives: trial work period, extended may be able to access, impairment-related work expenses |
Frequently Asked Questions
Can I work part-time while receiving long-term disability?
It depends on your policy. Some LTD plans allow part-time work and reduce your benefit by the amount you earn (offset). Others do not allow any work. A few have a "residual" or "partial" disability rider that pays a reduced benefit if you can work part-time but not full-time. Check your plan document or contact your benefits administrator to learn your policy's rules on work.
What happens if the insurance company denies my LTD claim?
You have the right to appeal. Request a written explanation of the denial, gather additional medical evidence, and submit a formal appeal to the insurance company. If the appeal is denied, you can file a complaint with your state's insurance commissioner or pursue a lawsuit. Many people hire a disability attorney for appeals, especially if the benefit amount is substantial.
Do I have to pay taxes on my long-term disability benefits?
It depends on who paid the premiums. If your employer paid the premiums and you did not pay any part of them, your LTD benefits are taxable income. If you paid the premiums with after-tax dollars, your benefits are not taxed. If you and your employer split the cost, a portion of your benefits may be taxable. Ask your HR department or the insurance company for a tax statement (Form 1099-R) when you file your return.
Can I receive long-term disability and Social Security Disability Insurance at the same time?
Yes, but your LTD benefit is usually reduced by the amount of SSDI you receive (the offset clause). So you receive both, but the total does not exceed your pre-disability income. This is by design: the offset prevents you from earning more while disabled than you did while working.
What if I recover while on long-term disability?
You must notify the insurance company when ready. Continuing to receive benefits after you have recovered is fraud. The insurance company will likely ask for medical evidence of your recovery and may require a functional capacity evaluation to confirm you can return to work. Once you return to work, your LTD benefits end, and you may lose may be able to access for SSDI if you earn above the substantial gainful activity limit.