Long Term Disability
A disability can strip you of your ability to make a living. While some people can dip into their savings account to get by without working for a few months, few people can afford to stop working altogether for a longer period of time. That’s where long-term disability insurance can help. Long-term disability policies provide you with income for an extended period. Most people who have long-term disability insurance get it through their employers.
Long-term disability coverage picks up where short-term disability insurance leaves off. Once the short-term benefits expire (generally after three to six months), long-term disability insurance pays a percentage of your salary, usually from 50% to 60%, depending on the policy. The benefits last until you can go back to work or for the number of years stated in the policy.
Some policies payout as long as you are disabled or until age 65. If an employee pays their premiums with after-tax dollars, their disability benefits will be tax-free. If an employer pays for the policy, most likely with pre-tax dollars, employees would be required to pay income taxes on the benefits.