Long-Term Disability Policy Template

Life is unpredictable. While we all hope to remain healthy and able to work, there are times when an employee may experience a serious illness or injury that prevents them from performing their job duties for an extended period. Long-term disability (LTD) insurance helps protect employees from income loss during these challenging circumstances by providing financial support when they are unable to work due to medical reasons.

Offering a long-term disability policy isn't just a competitive benefit — it’s a critical component of a comprehensive employee wellness and risk mitigation strategy. By formalizing your LTD policy, you help employees plan for the unexpected and demonstrate your company’s commitment to supporting their financial and personal wellbeing.

What a Long-Term Disability Policy Should Include

A robust long-term disability policy should clearly explain:

• Policy overview and purpose: Why LTD coverage is offered and who it applies to
• Eligibility criteria: Which employees are eligible for LTD coverage, including waiting periods and minimum work hours
• Definition of disability: How the company or insurer defines "disability" in the context of the plan
• Coverage details: The benefit amount, percentage of income replaced, duration of benefits, and maximum monthly limits
• Elimination period (waiting period): How long employees must be disabled before LTD benefits begin
• Coordination with other benefits: How LTD interacts with short-term disability, paid time off, workers’ compensation, Social Security Disability Insurance (SSDI), or other income sources
• Benefit exclusions and limitations: Conditions that are not covered (e.g., pre-existing conditions, self-inflicted injuries)
• How to file a claim: Steps employees need to take to initiate a claim, including documentation and medical certification
• Return-to-work expectations: Support for transitioning back to work, including accommodations and part-time return options
• Contact information: Who to reach out to for LTD-related questions or claims assistance

Purpose of the Policy

The primary goals of a long-term disability policy are to:

• Provide financial protection for employees facing a significant, long-term health issue
• Clarify the process for applying for and receiving LTD benefits
• Ensure compliance with employment laws and benefits regulations
• Foster a compassionate, supportive work culture where employees feel safe prioritizing their health
• Reduce administrative confusion and support HR teams in managing leaves consistently

Long-Term Disability Policy Template

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1. Policy Overview

Our company offers long-term disability (LTD) insurance to eligible employees to provide income replacement in the event of a serious illness or injury that prevents them from working for an extended period. This benefit is designed to support financial stability while allowing time for recovery and rehabilitation.

This policy outlines LTD eligibility, benefits, and the procedures for filing and managing a disability claim.

2. Eligibility

Employees are eligible for long-term disability coverage if they:

• Are classified as full-time employees
• Work a minimum of [30] hours per week
• Have completed [90 days] of continuous employment (or the insurer's stated waiting period)

Coverage begins automatically (if employer-paid) or upon enrollment (if employee-elected) once eligibility requirements are met.

3. Definition of Disability

Under the LTD plan, an employee is considered "disabled" if, due to illness or injury:

• They are unable to perform the material duties of their own occupation during the "own occupation" period (typically the first 24 months of disability), and
• After that period, they are unable to perform the duties of any occupation for which they are reasonably suited by education, training, or experience

Disability determinations are made by the LTD insurance provider and require documentation from a qualified medical professional.

4. Coverage Details

The long-term disability plan provides the following benefit:

• Benefit amount: [60%] of pre-disability base salary
• Maximum monthly benefit: [$10,000]
• Benefit duration: Up to [5 years] or until Social Security Normal Retirement Age (SSNRA), depending on the policy
• Taxability: [Specify whether benefits are taxable or not, based on who pays the premium]

Note: Bonuses, commissions, overtime, and other incentive compensation may not be included in the base salary calculation unless otherwise stated in the plan.

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5. Elimination Period

There is a [90-day] elimination period (also known as a waiting period), during which no LTD benefits are payable. During this time, employees are expected to use:

• Accrued sick leave or paid time off (if available)
• Short-term disability (if applicable)
• Other income sources, such as workers’ compensation or state disability benefits

Employees must remain continuously disabled during the elimination period to qualify for LTD benefits.

6. Filing a Claim

To initiate an LTD claim, employees should:

1. Notify their manager and HR as soon as they become aware that they may be out of work for more than [30] days.
2. Complete the LTD claim form (provided by the insurer or HR).
3. Submit supporting medical documentation from their healthcare provider(s).
4. Cooperate with any requests from the insurance company for additional documentation or evaluations.

HR will support employees through the claims process and liaise with the insurer as needed.

7. Coordination with Other Benefits

LTD benefits may be reduced by income received from the following sources:

• Workers’ compensation
• Social Security Disability Insurance (SSDI)
• State disability insurance (if applicable)
• Retirement or pension plans
• Other group or individual disability benefits

The combination of LTD benefits and other income sources cannot exceed [100%] of pre-disability earnings. Employees are required to report any additional income while receiving LTD benefits.

8. Exclusions and Limitations

The LTD plan does not cover disabilities resulting from:

• Self-inflicted injuries or attempted suicide
• Acts of war, insurrection, or participation in a felony
• Substance abuse without documented participation in a rehabilitation program
• Disabilities occurring during the first [12 months] of coverage due to a pre-existing condition (as defined by the plan)

Coverage terms are determined by the LTD insurance policy. Employees are encouraged to review the official summary plan description (SPD) or contact HR with questions.

9. Job Protection and Return to Work

The LTD policy does not guarantee job protection during the leave period. However, we will make reasonable efforts to:

• Accommodate employees returning to work after an extended disability leave
• Provide transitional duties or part-time options where appropriate
• Comply with federal, state, and local laws related to disability and job accommodation (including the Americans with Disabilities Act, if applicable)

Employees must notify HR of their intent to return to work as soon as they are cleared by their healthcare provider.

10. Contact Information

For questions or to begin a long-term disability claim, contact:

[Insert HR contact name]
[Insert email address]
[Insert phone number]

Employees may also refer to the [insurance provider’s name] website or hotline for information on claim forms and policy details.

Frequently Asked Questions

1. Is long-term disability coverage automatic or do I need to enroll?
If LTD is employer-paid, coverage is typically automatic after you meet the eligibility requirements. If it’s voluntary, you’ll need to enroll during your benefits enrollment window.

2. Can I use sick leave or PTO while waiting for LTD benefits to begin?
Yes. During the elimination period (usually 90 days), you can use available paid time off or other benefits like short-term disability if applicable.

3. Will I lose my job while I’m on long-term disability?
LTD does not guarantee job protection, but we will work with you to explore accommodations and options for your return to work. Protections under the ADA or FMLA (if applicable) may still apply.

4. Are LTD benefits taxable?
It depends on who pays the premium. If the company pays, benefits are typically taxable. If the employee pays the premium with after-tax dollars, benefits are generally not taxed.

5. How long can I receive LTD benefits?
Benefits may last up to five years or until you reach retirement age, depending on the plan’s terms and your continued disability status.

6. What if my LTD claim is denied?
You have the right to appeal a denial. HR or the insurance provider can provide guidance on the appeals process and required documentation.

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