Employer-provided vs. private LTD insurance

Long-term disability insurance is a blessing for someone who suffers an illness or injury that keeps him or her from working for a long period. It provides supplemental income to cover basic needs when a person cannot earn money his or herself.

Many employers offer this type of insurance coverage. However, people should be aware that they can also get it through a private insurer. Which option is the best?

Employer coverage

According to the Insurance Information Institute, employer-provided long-term disability insurance is typically free. Employers will usually cover the costs, but this also means they determine the terms. The terms include how long a person must wait until benefits begin and how long he or she can receive payments under the insurance. In addition, any payments a person receives are subject to taxation.

Private insurance

U.S. Bank explains that having employer-based insurance may not be enough to cover a person’s needs since it often only provides 60% of the person’s average income. Private insurance can offer up to 85%, and it is not taxable like employer-provided benefits.

Other advantages are that a person can maintain private insurance even if he or she ends employment or switches employers since it does not tie into the employer benefit package. A person also gets to choose the terms. He or she can set how long the wait for benefits to kick in is. A private plan may also not have restrictions that mean a person cannot qualify for benefits if he or she is only partially disabled.

The downside is that a person will have to pay for LTD through a private provider.