Meet Chaos. Chaos has been working at Corporate Co.’s sunny L.A. office for the past seven years. Chaos loves his job, and thinks he already has everything he needs, everything from a well-funded 401(k) to great health insurance. However, Chaos is actually missing one thing. Long-term disability insurance. Chaos is stunned. What on earth is that?


Well, like all insurance, long-term disability insurance reduces the costs associated with a risk, in this case a disability keeping you from working long-term, in return for a monthly fee called a premium, which is based on everything from your age to your medical history. Sounds simple enough right? So how does long-term disability insurance work exactly? Well, in a nutshell, think of it as income-replacement.


Should the worst happen and you find yourself unable to work due to an accident or illness, unlike health insurance, which only covers the medical bills, long-term disability insurance will give you cash to compensate your lost work, generally between 40-65% of your salary tax-free. Pretty great right? Well, Chaos is sceptical. After all, he’s extremely healthy, what are the odds he’ll suffer a long-term disability? As it turns out, surprisingly high. The Social Security Administration estimates 1 in 3 Americans entering the workforce today will suffer a disability of some sort, of which only 5% will be covered by worker’s compensation, which is an insurance plan that covers accidents or illness caused by your work.


This makes sense, especially when you realize that 90% of long-term disabilities are caused by illnesses such as cancer. This is where long-term disability insurance comes in. It covers almost every non-preexisting disability and only costs around 1-4% of your annual income. This is quite reasonable, especially considering that long-term disabilities last about 2.5 years on average and can be financially ruinous, even with adequate savings and a loving family to support you.

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Hopefully you and Chaos now understand the basics of long-term disability insurance. Be sure to check out our next video, which teaches you how to actually get long-term disability insurance, and be sure to check out our website, where you can find more educational material and free recommendations for great long-term disability insurance plans.



Meet Chaos. Chaos has been working for Corporate Co. in their sunny L.A. office for the past seven years.


He just finished our video “Long-Term Disability Insurance 101” and has been convinced of the value of its value. He’s ready to take the plunge, but doesn’t know where to start. What should he do? Well, his first step is simple: shop around for the best long-term disability insurance plan. To do this, Chaos can either go online and get quotes from a bunch of insurers, contact a local insurance agent, or use our prefered website to easily compare insurance quotes from the best providers. Then once Chaos selects a plan, he’ll have to submit an application that provides basic information to the insurer, such as employment status, proof of income, and a release to review his health records. After that’s done, an insurance representative will contact him to schedule two things: a phone interview and paramedical exam.


During the phone interview, the representative will typically ask Chaos questions about his hobbies, lifestyle, and health history. During the paramedical exam, which generally takes place either at home or at work, a trained medical professional will take Chaos’s basic vital signs, as well as a blood and urine sample. Once those two tasks are completed, assuming everything else in order, an insurance underwriter will look at Chaos’s application and approve him. Now that Chaos understands how long-term disability insurance works and how to get it, as long as he follows these seven rules he should be set for the future.

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Rule 1: Determine whether or not you actually need to purchase long-term disability insurance on your own, as your employer may have already provided it for you. For more details, contact your HR department.

Rule 2: To ensure adequate coverage, always target a policy worth about 60% of your current pre-tax income.

Rule 3: Once you find a policy with the right amount of coverage, make sure it’s a non-cancellable, own occupation policy with residual benefits. That was a lot of strange words, so let’s break it down one by one. Non-cancelable means your terms and premiums are fixed permanently at purchase, allowing you to lock in a low lifetime rate. “Own occupation” ensures you’ll still get a payout, even if your disability still allows you to work, just not in your current occupation. Finally, should your disability only prevent you from working full-time, residual benefits will ensure you still get benefits for any part-time work.

Rule 4: Although it’s more expensive, try to find a policy with a benefit period lasting until age 67. This will ensure you’re covered all the way to retirement, though if you can’t afford it, make sure your benefit period is at least five years long.

Rule 5: Make sure your policy has an elimination period of at least 90 days, which is the the time between your disability and the start of your benefits. The longer you can make it, the cheaper your policy will be.

Rule 6: Always read the fine print and only get long-term disability insurance from reputable providers with excellent credit ratings. If that sounds confusing to you, don’t worry, our recommended website does this screening process for you.

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Rule 7, the final rule: If you suffer a long-term disability, don’t delay, call your insurer and file a claim as soon as possible. Congratulations! You have finished our long-term disability insurance basics curriculum! If you want to see our free recommendations for great long-term disability plans, or just more educational material, be sure to check out our website!

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