Long-term disability

Long-term disability (LTD) insurance is a type of coverage that provides income replacement for employees who are unable to work for an extended period due to serious illness or injury

Homebase Team

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What is long-term disability?

Long-term disability (LTD) insurance is a type of coverage that provides income replacement for employees who are unable to work for an extended period due to serious illness or injury. Unlike short-term disability, which typically covers weeks or a few months, long-term disability benefits can last for several years—or even until retirement—depending on the plan.

For small business owners, offering long-term disability coverage as part of your benefits package can be a meaningful way to support your team’s financial security and well-being. While not always legally required, providing this option shows your employees that you’re committed to their long-term health and stability.

If you’re looking to simplify how you manage benefits and payroll, sign up for Homebase to keep all your payroll and team management tools in one place.

How long-term disability insurance works

Long-term disability insurance kicks in after an employee has been unable to work for a specific waiting period—usually after short-term disability benefits have been exhausted. Depending on the policy, LTD can replace between 50% and 70% of the employee’s regular income.

Key features of long-term disability plans include:

Elimination period – The waiting time before benefits begin (often 90 to 180 days)
Benefit amount – A percentage of the employee’s salary that will be paid during the disability period
Benefit duration – How long payments continue (e.g., two years, five years, until retirement age)
Definition of disability – Specifies what qualifies as a disabling condition under the policy

Some plans cover both physical and mental health conditions, while others may have limitations on certain diagnoses.

Why offering long-term disability coverage matters for small businesses

While not as commonly offered as health insurance or paid time off, long-term disability coverage can provide valuable peace of mind for your employees. Here’s why it matters:

Protects your team from financial hardship – Serious health issues can cause long-term income loss; disability coverage helps employees stay afloat.
Improves employee retention and loyalty – Benefits like LTD show your team you care about their long-term security.
Enhances your employer brand – Offering competitive benefits helps you attract and retain skilled workers, especially in competitive labor markets.
Supports compliance with local laws (where applicable) – Some states may have disability-related requirements for certain industries or business sizes.

For small businesses, especially in industries where physical labor is involved, LTD coverage can be an important safeguard.

What long-term disability typically covers

Conditions that may be covered by long-term disability insurance include:

Serious injuries (like back injuries, fractures, or severe sprains)
Chronic illnesses (such as cancer, multiple sclerosis, or heart disease)
Mental health conditions (in some policies), including severe depression or anxiety
Disabling surgeries with extended recovery periods

It’s important to review the specific details of your policy because exclusions and definitions of disability can vary between providers.

Employer responsibilities for long-term disability coverage

If your business offers LTD insurance, your responsibilities may include:

Selecting and negotiating plan options with an insurance provider
Sharing plan details and eligibility requirements with your employees
Handling enrollment and payroll deductions if employees share premium costs
Assisting with claims paperwork if an employee becomes disabled

Some businesses cover the full premium cost, while others offer LTD as a voluntary benefit that employees can choose and pay for themselves.

Long-term disability vs. short-term disability

Here’s how LTD compares to short-term disability insurance:

Both types of coverage work together to provide comprehensive protection—but long-term disability is what offers financial stability for the long haul.

How Homebase helps you manage benefits and payroll with ease

Managing benefits like long-term disability, along with payroll and compliance, doesn’t have to be complicated. Homebase helps small business owners handle the administrative side of hiring, paying, and supporting your team—all in one platform.

With Homebase, you can:

Automate payroll processing and tax filings
Manage benefits and deductions seamlessly
Keep accurate records for every employee
Stay compliant with labor laws and reporting requirements
Simplify new hire onboarding and document collection

Explore Homebase payroll to take the stress out of payroll and benefits management, so you can focus on building your business and taking care of your team.

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