How to Shop for Long-Term Disability Insurance

Learn to compare long-term disability insurance policies by evaluating coverage amounts, benefit periods, and key policy features.

  1. Calculate how much monthly income you need to replace. Start with your current monthly take-home pay and subtract expenses you wouldn't have if disabled (like commuting costs). Most policies replace 60-70% of your gross income, but you need to know your actual coverage gap. If you take home $4,000 monthly and need $3,200 to cover essentials, that's your target benefit amount.
  2. Choose your benefit period and elimination period. The benefit period is how long payments continue — options range from 2 years to age 67. The elimination period is your waiting time before benefits start, typically 90 to 365 days. Longer elimination periods mean lower premiums but more money you'll need from savings to bridge the gap.
  3. Compare how each policy defines 'disability'. Own-occupation coverage pays if you can't do your specific job, even if you could work elsewhere. Any-occupation coverage only pays if you can't work in any job suited to your education and experience. Own-occupation costs more but offers stronger protection, especially for specialized professionals.
  4. Look for cost-of-living adjustments and residual benefits. Cost-of-living adjustments increase your benefit amount over time to keep up with inflation — essential for long-term claims. Residual benefits pay partial benefits if you can work part-time or earn reduced income. These riders add cost but prevent your purchasing power from eroding during extended disabilities.
  5. Check if your employer offers group coverage first. Group long-term disability through your employer typically costs less and requires no medical exam. However, coverage often caps at 60% of income with a monthly maximum around $5,000-$10,000. If that's insufficient or you want portability when changing jobs, supplement with individual coverage.
  6. Get quotes from multiple insurers and compare total costs. Premium costs vary significantly between insurers for the same coverage level. Request quotes from at least 3 companies, including the total annual cost with your chosen riders. Factor in each insurer's financial strength rating — stick with companies rated A- or better by A.M. Best.