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2024 Allstate Disability Insurance Review

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6 mins

“Are you in good hands?”

You might recognize those words as being the centerpiece of Allstate Insurance’s advertising. Though its primarily known for its auto and homeowners insurance, Allstate does offer disability insurance — specifically, short-term and long-term coverage for companies with 25 or more employees.

Allstate long-term disability coverage

Allstate’s long-term disability (LTD) insurance product isn’t flashy, but it’s solid. They’re the largest publicly held personal lines insurer in the U.S. for many reasons — two of them being that they know their competition, and they’re rarely left behind as far as features and benefits are concerned.

Allstate’s LTD offering could be considered a “me too” product. It has everything you need, but nothing out of the ordinary. It has three major components:

  1. An elimination period of 90 or 180 days
  2. A monthly benefit from $400 to $6,000, or 60% of monthly earnings (whichever is less)
  3. A benefit duration period of 2 years, 5 years, or Normal Social Security Retirement Age (NSSRA)

The employer determines the elimination and benefit duration periods and may also choose the monthly benefit amount.

Once the employee has provided sufficient proof of disability and loss of income and has satisfied the selected elimination period, the monthly benefit is paid. The employee will continue to receive benefit payments until their medical provider has released them to return to work or the benefit duration period has been reached.

The policy is guaranteed to be issued if an employee enrolls in the plan when they are first eligible, which could be the first day of employment or their first enrollment period. There are no medical questions asked if the employee enrolls within the guaranteed issue period.

However, if they choose to wait until the next annual enrollment period after their initial eligibility, they will need to provide evidence of insurability. This can pose a problem if the employee has any pre-existing conditions. Allstate’s LTD policy has a pre-existing conditions limitation (12/12) – there is no coverage for 12 months from the effective date of coverage for any condition the employee has received treatment for in the past 12 months.

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Allstate disability insurance standard policy features

Allstate’s LTD policy provides 24-hour coverage for active full-time employees. Other standard features available at no extra cost include:

  • A waiver of premium provision. The insured is not required to pay premiums while receiving benefits under the plan.
  • Partial disability benefits. The employee is considered partially disabled if their income is reduced by 20% to 80% of their pre-disability earnings. The payment amount is then determined by the percentage of income lost due to the disability.
  • Recurrent disability benefits. A current disability is treated as part of the employee’s claim. Therefore, it doesn’t require completing another elimination period if the recurrent disability occurs within 6 months from the end of the prior claim for that disability.
  • Family survivor income benefits. If a disabled insured dies, a lump sum payment equal to 3 times the insured’s gross disability benefit will be paid to the eligible survivor if, on the date of death, the insured’s disability had continued for 180 or more consecutive days and they were entitled to, or receiving, payments under the plan.

Like other LTD policies, benefits don’t decrease with age, but the benefit duration is modified for disabilities beginning at age 60 or beyond. Rates will increase upon a policy anniversary when the employee moves from one age bracket to another.

Pregnancy is covered the same as any other illness. However, no benefits will be paid for pregnancy which begins in the first 12 months of coverage if it was a pre-existing condition.

Allstate LTD benefit reduction and taxation

Like other disability income insurance plans, LTD benefits are reduced by all deductible sources of income that are listed in the policy, which would include any benefits received under a state compulsory benefit law or act, other employee benefit plans, sick leave, or Social Security or other federal disability benefits.

This coordination of benefits allows disabled employees to receive up to 60% of their gross income from all sources combined. LTD benefits are not reduced by any individual disability income insurance plan the employee personally pays for or income received from a 401(k) plan or a retirement plan from another employer.

As long as the premium for LTD coverage is paid for with after-tax dollars (income already taxed by the government), LTD benefits are not taxable. However, if the premiums are paid with pre-tax dollars through a Section 125 plan or are paid by the employer, the benefit received by the employee will be taxed as regular income.

One of the finest features of Allstate’s LTD plan is that after their employment terminates, the employee can continue their coverage for up to 24 months by paying Allstate directly if they had LTD coverage for the past 12 consecutive months and the master contract under their employer is still in force.

Learn More: How Long Does Long Term Disability Last?

Allstate short-term disability coverage

Allstate’s short-term disability (STD) plan mirrors the LTD plan in almost every respect as far as standard features are concerned. What differs are the length of the benefit period and the elimination period.

For example, a popular configuration of an LTD plan is a 90-day waiting period and a benefit period ranging from 2 years up to retirement age. Conversely, STD plans often have elimination periods of 7 days and benefit periods up to 6 months.

Employees that have access to both LTD and STD through their employer are fortunate and should seriously consider enrolling in these plans. If an employer doesn’t offer an STD or LTD plan, employees should investigate purchasing an individual disability insurance plan,

Allstate is the powerhouse behind the products. American Heritage Life, a subsidiary of Allstate, actually underwrites the insurance plans, but they have the full financial backing of Allstate.

Learn More: How Does Short Term Disability Work?

Having grown up in upstate New York, Bob Phillips spent over 15 years in the financial services world and has been making freelance writing contributions to blogs and websites since 2007. He resides in North Texas with his wife and Doberman puppy.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published July 9, 2021
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