You were able to get long-term disability (LTD) insurance at a very minimal cost through your employer. It’s one of those things you hope you’ll never need, but it would be good to have in case of a serious injury or illness since it reimburses you for a majority of your salary while you can’t work.
The problem is that most employer-sponsored (or ERISA) LTD policies only reimburse about 60% of an employee’s salary. Further, if your policy has an elimination period, it may not cover that first month or even longer from the date of the injury or onset of the illness. Most people can’t support their families on 60% of their salary without raiding their retirement and savings accounts.
Further, if your payments for your insurance are taken as a pre-tax deduction from your paycheck, you will be taxed on benefits that are paid out. That’s one more financial hit you don’t need.
A private policy can cover nearly all of your lost wages – for a price
If you’re a primary breadwinner for your family or if you support yourself, it is wise to also have LTD insurance coverage through an individual or private policy. It costs more than an employer-sponsored plan, but these policies can cover as much as 90% of your income while you’re unable to work.
The more it covers and the shorter the elimination period, the higher the premium will be. However, benefits aren’t taxed, and you don’t have to worry about losing your insurance if you leave your job.
It’s possible to file claims on both plans if you need to. Depending on what the rules are for the policies you have, having both an employer-sponsored and private policy can help you get closer to full salary while you’re unable to work.
Dealing with insurance claims while you’re ill or injured can be extremely difficult. If you’re having difficulty getting the benefits to which you’re entitled, it can be wise to have experienced legal guidance.