Long-Term Disability Insurance Benefits: How Much of Your Salary Do You Get?

When you’re looking for long-term disability insurance, one of the most important factors is how much of your income it would replace. The answer largely depends on the terms of the policy you get and whether a disability makes it difficult to do your job or prevents you from working entirely. 

To help determine how disability insurance works and how much of your salary it might cover, let’s learn more about this type of insurance. 

What is disability insurance? 

Disability insurance protects your income if an illness or injury leaves you partially or totally unable to work. It’s a critical part of any financial plan because it protects the income that you use to achieve your financial goals. 

Where can I get long-term disability insurance?

Some employers offer long-term disability insurance as part of a benefits package. But when they do, those benefits typically would replace only 50 to 60 percent of your income. Some people may also be eligible for disability coverage through the federal government. However, many people choose to supplement work policies or — if they don’t get disability insurance through work — cover their full disability insurance need by purchasing a private policy on their own.  

The limitations of employer-provided policies

While having an employer-provided long-term disability insurance policy is a great perk, these policies also have limitations. First, they don’t go with you if you leave the employer. Additionally, the benefit is typically taxable (private coverage is typically paid tax-free). This is another reason many people choose to get private disability insurance coverage.  

How much of my salary would I get on long-term disability insurance?

Whether you get your benefit through a single policy or multiple disability insurance policies, you can typically cover most of your income. However, it’s unlikely that you will get insurance with a benefit that will cover all of it. Another key factor is whether a disability prevents you from working entirely or partially. Many policies will pay partial or full benefits depending on the disability itself. 

Why do I need long-term disability insurance?

While short-term disability insurance protects your income for the first three to six months immediately following a health issue or injury, long-term disability insurance can cover you for the months and years beyond that. Given that, long-term disability insurance policies usually have a waiting period before you start receiving benefits. Once the policy kicks in, the benefit can last for months, years, or until you reach a certain age (usually the time you would have retired).  

Long-term disability insurance protects your most important asset: your income. If you’re unable to work because of a disability, the benefit can help you and your family maintain your lifestyle. That’s why it’s such an important part of any financial plan. 

To be used with form ICC16.TT.DI.IIB.(0916), ICC16.TT.DI.FIB.(0916), ICC16.TT.DI.CAT.(0916), ICC16.TT.NCDI.(0916), ICC16.TT.GRDI.(0916), ICC16.TT.DI.PDB.(0916), ICC16.TT.DI.PDBO.(0916) or state equivalent. Not all contracts and optional benefits are available in all states. Disability insurance policies contain some features and benefits that may not be available in all states. The ability to perform the substantial and material duties of your occupation is only one of the factors that determine eligibility for disability benefits. These policies also contain exclusions, limitations and reduction-of-benefits provisions. Eligibility for disability income insurance, additional policy benefits, and qualification for benefits, is determined on a case-by-case basis. For costs and complete details of coverage, contact your Northwestern Mutual Financial Representative.  
 
Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) (life insurance, disability insurance, annuities, and life insurance with long-term care benefits) 

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