I am no expert here but our LTD benefits are definitely tax-free. I actually think most similar LTD plans are; I know it was at my previous company even though the rates were much more expensive and we had several additional conditions on when we'd get paid, etc.
Anyways, several months ago I flew with a captain who's been on LTD for more than 3 years (heart issues - which he said were the norm in his family both on his and his wife's side). Well, I asked him about the LTD insurance, etc and he said it was the best thing he'd ever signed up for. In fact, even though his "income" was relatively lower during his medical ordeal, since it was tax-free, his paychecks were basically identical to what he'd been getting prior to getting sick.
...I do however recall at the union dinner they were also selling the Pilot Mutual Aid...
Mutual Aid helps out while you are waiting for the LTD to kick in, at least that's my understanding.
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