Long-Term Disability Insurance (LTD)

Eligibility and Application

Where to Sign Up

If your employer offers Long-Term Disability (LTD) Insurance, you can sign up by contacting your employer’s Human Resources department.

If you don’t have an employer that offers LTD, you can apply for coverage:

  • Through a trade union, alumni organization, or other professional organization you are a member of if they offer group plans
  • With an insurance agent if you want an individual plan

Group Coverage and Individual Coverage

Long-Term Disability (LTD) Insurance you get through an employer, union, or other professional organization is known as group coverage and is your best option. To get coverage through your employer, you usually need to be working a minimum number of hours per week. This is called the “active work requirement.”

Another option is to purchase individual coverage directly from an insurance company or agent. The main reason for getting an individual policy is if you work for an employer that does not offer any LTD policy.

Getting an individual policy is a little more complicated than getting a group policy. You will have to look at different factors before you choose a policy and undergo medical underwriting. You may be denied coverage. These and other issues related to finding and choosing an individual policy are discussed below.

Major Differences in Policies

If you purchase an individual policy, you will pay a monthly premium for your Long-Term Disability (LTD) Insurance. The premium depends on many factors, including your age, your health, the type of work you did when you first signed up for LTD, and the length of the waiting period.

If you have a group LTD policy, ask your Human Resources department about your plan’s waiting period, coverage amount, and benefits period:

  • Waiting Period: Sometimes called the elimination period. This is the period between the start of your disability and when you are paid your benefits. Generally, policies with longer waiting periods are cheaper. For LTD plans, the waiting period is usually between 30 days (one month) to a year (12 months) after the disability has occurred. Some policies allow you to choose the waiting period.
  • Benefits Rates: Most policies pay about 60% of the income you made prior to becoming disabled. If you get an individual policy, you may be able to pay more and get a policy that will pay a higher rate if you become disabled. Think about how much money you believe you would need to pay for your essential monthly expenses, such as your mortgage payments or rent, food, utilities, and transportation, if you couldn’t work. Remember that if you develop a disability, you may also have additional medical costs. Try to get a plan that you think will cover your expenses.
  • Benefits Period: The benefits period is the amount of time that you get benefits if you become disabled. For LTD policies, the benefits period can vary between a set number of years, such as two years or five years, or it can be until you reach a certain age, such as 65.

Medical History and Pre-Existing Conditions

When you sign up for LTD insurance, the insurance provider will look at your medical history. Insurers look at your medical history differently, depending on whether you are signing up for group coverage or applying for individual coverage.

Group Coverage

For employer-sponsored coverage, you will be allowed to sign up for the plan during an initial enrollment period. During this period, the insurance company cannot deny you coverage based upon a pre-existing condition, so it is very important to sign up then.

If you have a pre-existing condition when you sign up for your group plan, you may be required to work for a certain period of time before that pre-existing condition is covered by your insurance policy. This period of time is generally between 12 months (one year) and 24 months (two years) and is called an exclusionary period.

If you do not sign up during the initial enrollment period, you may have to undergo medical underwriting. The insurance company may review your medical records to find out if you have a pre-existing condition or are getting treatment for a potentially disabling condition. Treatment can include advice from a doctor or a medication. If the insurance company finds that you do have a health condition or have been treated for one, the insurance company can deny you coverage, not cover those conditions, or have an exclusionary period for your conditions.

Similar rules apply to other types of group coverage that are not employment-based (like group policies through a trade union or professional organization). There may be specific periods of enrollment, insurance companies may be able to deny coverage based on health conditions, and there may be exclusionary periods for pre-existing conditions.

Individual Coverage

If you want individual coverage because you do not have access to group coverage or because your group coverage offers small cash benefits or doesn’t give you benefits for long enough if you do become disabled, you will also have to undergo medical underwriting.

The insurance company will review your application and may request and review your medical records to find out if you have a pre-existing condition or are getting treatment (including advice from a doctor or taking a medication) for a potentially disabling condition. If the insurance company decides that you do have a health condition or have been treated for one, they can refuse to sell you an LTD policy, sell you a policy that doesn't cover those conditions or that has an exclusionary period for your conditions.

When to Sign Up

The sooner you sign up for disability income insurance, the better. With employer-sponsored plans, you should sign up during your pre-enrollment period, also called the initial enrollment period. With other group policies, you may have to be a member of the group for a period of time before you can in enroll in the plan. Once you become eligible to enroll, sign up as quickly as you can to avoid exclusionary periods or the exclusion of specific conditions.

Service Wait

Some employers will only offer disability income insurance policies after you have worked for them for a set period of time called a service wait, or a minimum service requirement (for example, you may have to wait six months before you can enroll). Some policies also pay higher benefits for people who have worked for longer periods.

Service waits are also common for group plans that are offered by unions and other organizations. Your eligibility to enroll may depend on how long you have been a member of the group.

If you are interested in purchasing an individual policy, you should apply as young as possible. Young people pay lower premiums and if you purchase disability income insurance at a young age, you may be able to get a noncancelable policy, meaning that your coverage can’t be canceled. You also may be able to get a policy where your premiums can’t be raised as long as you pay your premiums on time.

Filing a complaint about an insurance provider’s decision

If you have a dispute with a disability income insurance provider, you can file a complaint with the Arizona Department of Insurance. You can file a complaint if you:

  • Believe you were wrongly denied disability income insurance coverage
  • Disagree with the medical underwriting based on a pre-existing condition, or
  • Believe that any other terms or conditions of your disability income insurance plan violate Arizona law.

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