California Long-Term Disability Insurance

Employer-funded disability insurance policies provide short-term disability benefits and long-term disability benefits.

Updated by , Attorney · UC Law San Francisco
Updated 5/15/2024

Employer-funded disability insurance policies can be a safety net for employees in California. When employees have non-work-related accidents that prevent them from working or earning a living, their earned income is protected. Private disability insurance policy benefits include paid sick leave, short-term disability benefits, and long-term disability benefits.

Options for Long-Term Disability Insurance in California

Given the high number of Americans living with disabilities, having disability insurance is a smart move for people who support themselves and their families through their jobs. Long-term disability (LTD) insurance, in particular, is extremely beneficial for employees who might experience a serious illness or injury.

While the state of California does have a short-term disability program (called State Disability Insurance, or SDI) that pays people 60%-70% of their wages for up to a year, the state doesn't have a long-term disability program. Social Security disability and SSI disability, which are notoriously hard to qualify for, are the only other options for long-term disability benefits in California.

Private long-term disability insurance can be obtained either by a group or individually. Group coverage can be offered through an employer, professional group, or association.

Long-term disabilities can continue anywhere from a year to the remainder of an individual's life. However, only about 35% of American workers currently have access to employer-sponsored long-term disability insurance coverage through their employers.

Typical Employer-Provided LTD Insurance Policies

Typical group long-term disability (LTD) benefits start when sick leave and short-term disability benefits are exhausted, and they replace about 60% of one's pay. In contrast, Social Security disability benefits are based on lifetime earnings, and the average monthly payment is about $1,500 a month (though some high-earners receive more than $3,000 a month).

SSI pays even less; the federal monthly payment is about $900 per month if you have no other income, plus California pays a small state supplementary payment to most SSI recipients.

Learn more about how much LTD policies pay.

What to Know About LTD Insurance

Here are some important facts to understand if you're looking to protect yourself against disability.

  • Eligibility. For employees whose companies offer long-term disability coverage, the individual must work for a specified period of time, known as a waiting period or service wait. For professional or association-affiliated LTD coverage, the individual must be a member of the group for a set period of time.
  • Price of LTD. For group LTD coverage, your employer may pay the full cost, or you may have to pay a percentage of the cost or a set premium. For individual LTD coverage, you will be responsible for the entire cost of insurance.
  • Coverage. Long-term disability coverage can last from one year to the age of retirementusually 65. However, some plans differ or have exceptions for mental illness; consult the summary plan description to verify the number of years covered by the insurance policy.
  • Medical costs. The LTD policy covers only wage replacement, not health coverage.
  • Pre-existing conditions. A pre-existing condition is any medical condition for which medical care was received three to six months prior to the coverage effective date. LTD plans may have a pre-existing conditions exclusionary period. During this period of time, an individual's prior medical condition(s) will not be covered by the policy.
  • Partial benefits. Employees whose hours are reduced because of a disability may be eligible to receive partial benefits.

Getting Other Benefits While You Collect Long-Term Disability Benefits

Getting LTD benefits doesn't prevent you from filing claims for other benefits, such as California's short-term SDI benefits or Social Security Disability Insurance (SSDI) benefits. However, your LTD benefits will usually be reduced by the monthly amount you receive in SSDI or SDI.

In addition, the long-term disability company will most likely be entitled to any back payments you get for months you were owed but not collecting SSDI or SDI benefits. (For example, Social Security may pay you for 12 months of back benefits if it takes the agency 12 months to decide your claim.) Most LTD policies with an offset provision will call for much of the back pay to be turned over to the insurance company because the company overpaid you for those months.

In addition, long-term disability payments often offset workers' comp benefits, meaning they will subtract the amount of your workers' comp benefits from your LTD payments.

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