What Is Long-Term Disability (LTD) Insurance – And How Does It Work With Sick Leave and Short-Term Disability Insurance? A Guide for Expat Employers
When an employee is seriously ill or injured, their ability to earn an income may be disrupted for weeks, months, or even longer. While most employers offer some form of paid sick leave, a complete income protection strategy goes far beyond that – and that’s where Short-Term Disability (STD) and Long-Term Disability (LTD) insurance come in.
This article explains what LTD is, how it differs from STD, how both work together with a company’s sick leave policy, and why these protections are essential for any organization that wants to offer meaningful support to employees during serious health events.
What Is Long-Term Disability (LTD) Insurance?
LTD insurance provides income protection for employees who are unable to work for an extended period due to serious illness or injury. It typically begins after other forms of compensation – such as sick leave or STD benefits – are exhausted.
LTD policies generally replace around 60–70% of the employee’s base salary, up to a maximum monthly benefit, and continue to pay for the duration of the disability or a set benefit period (such as for two or five years, or – more commonly – until retirement age).
LTD covers more than just accidents – While the term “disability” may suggest physical injury or accident-related impairment, this can be misleading. LTD also covers long-term illnesses like cancer, mental health conditions, degenerative diseases, post-surgical recovery, and more – as long as the employee meets the insurer’s eligibility criteria, typically defined as being medically unable to perform the duties of their role or any similar work.
What Is Short-Term Disability (STD) Insurance?
STD insurance acts as a bridge between sick leave and LTD coverage. It provides partial income replacement – often 60% to 100% of salary – for a period of several weeks to several months, depending on the policy terms. STD policies usually start after a short elimination or waiting period (7 days, for example) and last for up to 26 weeks (= 6 months).
STD is ideal for recovery from moderate but temporary conditions – such as recovery from surgery, injury, or short-term mental health treatment – that go beyond typical sick leave limits but don’t warrant LTD.
How Sick Leave, STD, and LTD Work Together
When designed as part of an integrated benefits strategy, these three elements create a continuum of protection for employees:
Employer Sick Leave
- Covers full salary for a limited period (10–30 days, for example)
- Paid directly by the company
Short-Term Disability (STD)
- Starts after sick leave ends
- Provides partial income (60–100%, for example) for up to 26 weeks
Long-Term Disability (LTD)
- Begins when STD ends
- Provides longer-term income protection (typically 60–70%) until recovery or the end of the benefit period
This layered structure ensures that employees don’t face a sudden income cliff just weeks into a serious illness.
What Happens If an Employee Is Removed from the Company Health Plan?
Some employers may eventually choose to remove a long-term sick employee from their active staff medical insurance plan, especially if they are no longer being paid a salary or formally leave the organisation.
If the employee qualifies for LTD and has already met the eligibility requirements and elimination period, they can continue to receive LTD benefit payments even after they leave the company or are removed from the health plan – as long as the coverage was in place when the disabling condition began.
Timing is critical. Employers should always confirm with their insurer:
- Whether LTD claims can continue post-employment
- What administrative steps are needed to maintain claim eligibility
- Whether there are implications for removing the employee from other benefits
Careful coordination is essential to avoid inadvertently disrupting the employee’s long-term income stream.
Why Employers Need STD and LTD Coverage
Companies that aim to build a responsible and compassionate sick leave policy cannot rely on paid leave alone – even if it’s generous.
- Sick leave is short-term by design. It may cover common illnesses and short recoveries, but it’s not intended for extended absences.
- Serious illness is more common than you think. Conditions like cancer, stroke, severe depression, and autoimmune disorders can keep employees out of work for months – sometimes years.
- STD and LTD prevent financial hardship. Without these protections, employees may be forced to take unpaid leave, use up savings, or even resign during a health crisis.
- Offering these benefits supports retention and trust. Employees are more likely to stay with employers who invest in their long-term wellbeing.
For organisations that want to truly protect their people, STD and LTD insurance are not optional — they are core pillars of a compassionate and employee-centered workplace benefits package.
LTD vs STD: A Quick Comparison
| Feature | Short-Term Disability (STD) | Long-Term Disability (LTD) |
|---|---|---|
| Coverage duration | Up to 26 weeks | Months to years (or until retirement) |
| Waiting period | Short (7-10 days) | Longer (90–180 days) |
| % of salary replaced | 60–100% | 50–70% |
| Covers illness? | Yes | Yes |
| Covers injury? | Yes | Yes |
| Who pays? | Employer or insurer | Employer or insurer |
| Ideal for: | Temporary recoveries | Chronic or long-term health issues |
Clarifying the Term “Disability”
It’s important to address a common misunderstanding: the word “disability” often brings to mind accidents or permanent impairment. But LTD insurance is much broader. It includes any medically certified condition that prevents someone from working, whether physical or mental, acute or chronic. That includes time off for:
- Cancer treatment and recovery
- Serious depression or anxiety
- Neurological or autoimmune disorders
- Long-term rehabilitation after surgery
As long as the employee is assessed by a medical professional and meets the insurer’s definition of incapacity, they may be eligible for LTD benefits – even if the condition is temporary or invisible.
A Sick Leave Policy Is Not Enough
For employers committed to safeguarding the health and financial stability of their workforce, a sick leave policy is only the first line of defense. To offer truly comprehensive protection, it must be backed by Short-Term and Long-Term Disability insurance.
These policies ensure that employees are covered not just for a week or two, but for as long as their recovery takes – whether that’s two months or two years. And for organisations, it’s not just a financial decision — it’s a clear statement of values: we take care of our people when it matters most.
Looking for Globally Mobile Coverage? We Can Help.
For international employers with globally mobile employees, not all LTD policies are created equal. At One World Cover, we work with insurers that offer flexible, multinational LTD coverage – including the ability to pay benefits to employees in their home country, even if they’re living and working abroad.
These cross-border solutions are essential for international schools, NGOs, multinational teams, and any organisation that wants to ensure their people are financially protected – wherever they are.
To learn more please get in touch: [email protected] or click here to contact us.
