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What is long-term disability insurance? p2

As we said in our last post, long-term disability insurance is wage replacement insurance. Health insurance, auto insurance, life insurance, property insurance -- they reimburse insureds for the expense or a portion of the expense of a covered event. Long-term and short-term disability insurance kick in when a covered event affects the insured's earning power.

When we left off, we were talking about a friend who had been diagnosed with amyotrophic lateral sclerosis. It quickly became apparent that she would no longer be able to handle her job. She applied for short-term disability through her employer-sponsored insurance program.

In some situations, short-term disability alone may be enough for a person who has been in an accident or whose health is expected to improve. A person with a badly broken leg, for example, may not be able to work as a retail clerk for a few months, but she is expected to make a full recovery before the end of her benefit period.

Our friend's ALS was terminal, and her condition would continue to deteriorate. There would be no return to work, and she and her family knew she would exhaust her short-term disability. The next step was to look into long-term disability coverage.

Her employer-sponsored plan made the transition easy. When the 90-day benefit period for the short-term coverage expired, the long-term coverage kicked in. Technically, under her plan there was a 90-day waiting period for the long-term coverage (the clock starts ticking the day the insured stops working). If our friend had not had the short-term coverage and had been out of paid time off, she would have been without any income during the first 90-days of her disability.

Short-term and long-term disability coverage is different in a few significant ways. We'll explain more in our next post.

Source: World Institute on Disability, "Short-Term and Long-Term Disability Insurance: The Details," accessed Sept. 22, 2014

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