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Know what's covered by your employer's long-term disability plan

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If your employer offers long-term disability insurance as part of your benefits package, you're more fortunate than a lot of workers. Businesses are always looking for ways to cut expenses wherever they can, and some opt not to offer these plans.

However, it's important to be aware that companies that do provide LTD policies are likely looking for ways to optimize the cost to them as well. Therefore, you need to know the details of your LTD coverage. This is important whether you're just now signing up for it or have had the plan for a while.

Some employers offer a "base/buy-up" arrangement. They will provide a base percentage of income replacement, but allow employees to pay for additional coverage themselves. If your employer offers that option, it's probably worth the cost to take advantage of it and pay a little more to increase the percentage.

Find out if the policy has a cost-of-living-adjustment provision. These provisions, which increase coverage to account for inflation, can be expensive for companies to offer, so they may choose not to. If you've been in your company's employer-sponsored plan for a while and there's no COLA provision, you may not have as much coverage as you think you have.

Determine how long the elimination period is. This is the period of time between when a person becomes disabled and when their LTD payments begin. If you have short-term disability and LTD coverage, your LTD coverage should begin when the STD coverage ends so that there's no gap in payments.

Know what the maximum monthly payment is in dollars. If your income is well into six figures, the maximum may not be enough to adequately cover your monthly expenses should you be unable to work.

After you've studied the coverage provided by your employer-sponsored LTD plan, you may want to consider getting your own policy to augment the coverage you have. You may even find that an individual policy is better for you than what your employer offers.

If you are unable to work for an extended period of time, you and your family will need to continue to pay the everyday bills in addition to the added medical expenses, so you need coverage that provides a sufficient percentage of income replacement for as long as you need it. You don't want to wait until it's too late that you don't have enough coverage to get by.

Source: Employee Benefit News, "8 ways to optimize your LTD plan for 2016," Zack Pace, Dec. 17, 2015

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