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Putting Risk in Its Place with Long-Term Disability Coverage

May 28, 2020

If you had to rank in order of importance the top three group welfare benefits an employer could offer an employee, what would they be? Perhaps number one would be Medical, number two would be Dental, and number three would be Vision. Would Long-Term Disability (LTD) rank in your top five? In my opinion, LTD should be ranked number two, right after major Medical. After all, if you do not have an income, you cannot pay for Medical, Dental, or Vision insurance.

For all intents and purposes, employers offer benefits to their employees for two reasons:

  1. They want to attract and retain the workforce necessary to get the job done.
  2. They indeed do care about their employees and want to provide them with coverage options that take care of them in their time of need.

However, the value placed on Long-Term Disability coverage is not where it should be, considering 70% of private sector workers are without this important benefit offering. This despite the following eye-opening statistics:

  • 37 million Americans are classified as being disabled, with 375,000 becoming disabled annually.
  • A 35-year-old has a 50% chance of a disability lasting 90 days or longer before they reach age 65, with 1 in 7 having a disability that lasts 5 years or longer in their lifetime.
  • 46% of all home foreclosures are caused by disability, with medical problems contributing to 62% of all bankruptcies filed in the U.S.

Some may argue there is not a need to provide their employees with LTD because Social Security Disability will step in, or if they are injured on the job, they will be covered by Worker’s Compensation. However, 90% of all disability accidents and illness are unrelated to the claimant’s employment. Also, most do not realize that the majority of SSDI claims are denied, and if approved, the time it takes to attain approval from the date of application averages about two years.

In addition, the average SSDI claimant receives a paltry $722 per month. A little-known benefit of employer provided LTD is the carrier will assist in expediting the SSDI approval process. Furthermore, the insurance company will only offset their monthly payout by what SSDI pays. For example, if the insurance plan were to pay a claimant $2,000 per month, and SSDI is going to pay $700, the carrier will continue to pay the difference of $1,300 per month, in most cases to Normal Social Security Retirement Age. This does not even account for the need of an individual to have worked for 10 years in order earn enough credits to qualify for SSDI.

At this point, you can see the importance of this benefit, and why your employees should appreciate an employer offering it. Long-Term Disability can be complicated with the way the contract is structured. For instance, the definition of occupation, what earnings are included, and of what a disability entails are all extremely important details that should line up with the needs of your workforce. For instance, you want to ensure commissions are included in the definition of earnings if you have a large sales team.

If you would like a review of your current LTD plan, or if you would like to speak about implementing a plan specific to your organization, please contact me direct.

For more information, contact:

Brad Heter
Benefits Advisor


(Sources: Statista, Council for Disability Awareness, Social Security Administration, National Safety Council, Prosperity Now, Consumer Federation of America, Texas Medical Association Insurance Trust)


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