Long Term Disability Insurance — Income Protection Through Age 65
Long term disability insurance replaces 50–70% of your income for years — or until retirement — if a serious illness or injury keeps you out of work. Critical coverage for self-employed, physicians, dentists, attorneys, and high-income professionals. Compare own-occupation policies from Assurity and Ameritas.
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What Is Long Term Disability Insurance?
Long term disability insurance is a private insurance policy that replaces 50 to 70% of your income for years — sometimes until age 65 or 67 — if a serious illness or injury prevents you from working. Unlike short term disability (3–12 months), long term disability is built for catastrophic scenarios: cancer, chronic illness, autoimmune disease, mental health conditions extending past a year, serious back injuries, or any disability that doesn’t resolve within months.
Social Security disability benefits are hard to get: SSA data show only about 1 in 3 SSDI applicants is approved at the initial medical decision (35.6% of initial medical decisions for 2022 applications), and only about 18% to 21% of all applicants are awarded benefits at that first step (SSA). Most people protect their car, their home, and their life — but not their income. That’s the gap long term disability insurance fills. Your ability to earn income is usually your single largest financial asset; a 35-year-old earning $75,000/year will earn about $2.25 million by age 65, before raises.
This is also called income protection insurance in some markets, particularly the UK and Australia — same product, different name.
Short Term Disability vs Long Term Disability
Most working professionals need both. Here’s how they fit together.
The difference between short term and long term disability is benefit duration and what triggers a claim. Short term disability handles the recovery window — weeks to months — while long term disability takes over for serious or chronic conditions extending beyond a year.
| Feature | Short Term Disability | Long Term Disability |
|---|---|---|
| Benefit period | 3 to 12 months | 2–5–10 years, or to age 65/67 |
| Elimination period | 0 to 14 days | 30, 60, 90, or 180 days |
| Income replacement | 60–70% | 50–70% |
| Common claims | Surgery, maternity, injury, mental health leave | Cancer, autoimmune, back injury, chronic illness |
| Premium | $30–$80/month | $60–$250/month |
| Best for | Anticipated short recovery (pregnancy, surgery) | Career-ending or career-pausing conditions |
How they stack: A typical professional with both policies might have short term disability covering days 1–180, and long term disability picking up at day 181 and continuing through age 65. The elimination period on the LTD policy is set to match where the STD policy benefits end — creating seamless income protection from week one through retirement.
Long Term Disability for Professionals
High-income specialists need own-occupation policies that protect their specific career — not just any job.
If you’ve spent years building expertise in a specialized career, a generic LTD policy isn’t enough. Own-occupation coverage is the strongest disability definition: it pays if you can’t perform your specific job, even if you could theoretically work in a different occupation. This matters most for surgeons (a hand injury ends a surgical career but not a desk career), dentists (back issues, repetitive strain), attorneys (cognitive demands), and other specialized professionals.
Disability Insurance for Self Employed & 1099 Contractors
If you’re self-employed or a 1099 contractor, you have no employer-sponsored disability coverage. There’s no short-term disability, no long-term disability, no FMLA. If illness or injury prevents you from working, your income stops the day you do. Disability insurance for self employed is your only paycheck protection.
Both Assurity and Ameritas offer individual long term disability policies designed specifically for self-employed workers, freelancers, gig economy workers, and small business owners. Underwriting is based on your tax returns (typically last 2 years of Schedule C or 1099s), and benefit amounts are capped based on documented income.
Business Overhead Expense (BOE) coverage
For business owners, a separate BOE policy covers fixed business expenses (rent, utilities, employee salaries, loan payments) while you’re disabled — keeping your business operating until you can return. BOE is paired with personal LTD: personal LTD pays your salary, BOE pays your business expenses. Your advisor can structure both together.
Long Term Disability Insurance Cost
Long term disability premiums depend heavily on your occupation, age and benefit design. As a rough example, a 35-year-old professional earning $100,000/year might see quotes of about $60–$250/month for individual long term disability coverage. The exact rate depends on:
- •Your occupation class. Office workers (Class 1) pay less than tradespeople (Class 5). Physicians and dentists are mid-class.
- •Your age and gender. Younger costs less. Women’s premiums are often higher because of claim experience, though some carriers offer unisex pricing.
- •Benefit period. 5-year benefits cost less than to-age-65 benefits.
- •Elimination period. 90-day elimination is standard; 180-day is cheapest.
- •Riders. Own-occupation, future increase, residual disability, COLA — each rider adds cost but adds protection.
Is disability insurance tax deductible?
For individuals: generally no. Premiums you pay with after-tax dollars generally aren’t deductible, and in return the benefits are generally tax-free (IRS Publication 525). When an employer pays the premiums, or you pay them pre-tax through a cafeteria plan, the benefits are generally taxable to the recipient. How this works for business owners depends on how the business is organized, so ask your CPA. Your advisor and CPA can structure the right approach for your situation.
Is long term disability taxable?
Same rule as short term: if you pay the premiums with after-tax dollars, benefits are generally tax-free (IRS Publication 525). If your employer pays the premiums or you pay through pre-tax payroll deduction, benefits are generally taxable as income; if you and your employer share the cost, the part from your employer’s payments is taxable. Individual policies you pay for yourself with after-tax money generally produce tax-free benefits.
How Does Long Term Disability Work?
Mortgage Disability Insurance
Mortgage disability insurance is a specialized form of long term disability designed to cover your mortgage payment if you become disabled. Some borrowers buy a standalone mortgage protection policy; most are better served by a properly sized standard LTD policy that covers the full mortgage payment plus other living expenses.
If your gross income is $7,000/month and your mortgage is $2,500/month, a 60% LTD policy paying $4,200/month already covers your mortgage with $1,700/month left over for other expenses. Standalone mortgage protection products typically cost more per dollar of coverage than a properly sized standard LTD policy. Ask your advisor to compare both options before choosing.
Long Term Disability Insurance FAQ
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Long term disability insurance from Assurity or Ameritas. Own-occupation policies for professionals, simplified underwriting for self-employed. Free advisor service.
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