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Long Term vs. Short Term Disability Insurance

Disability insurance is an insurance policy that offers income replacement when a person can't work due to an illness or injury. Some disability insurance policies cover workers for a short period of time. These are short-term disability benefits. Others, like long-term disability benefits, provide stable benefits for an extended time.

Deciding whether to get short-term, long-term, or both types of disability insurance depends on:

  • Your needs
  • Your expectations
  • Your budget

Advantages and Disadvantages of Short-Term Disability Insurance

Short-term disability insurance benefits cover people who can't work for brief periods. This is often due to a disabling condition. Some short-term policies can last for up to two years. But, the typical length of coverage lasts between three and six months.

Short-term disability insurance policies are usually the most affordable options. They tend to begin paying benefits immediately or within the first two weeks after the policyholder becomes disabled. They typically pay close to 100% of a worker's salary for the first few payments.

Short-term disability insurance could be your best employee benefit option if you:

  • Already have long-term disability coverage through an employer
  • Have limited savings to cover the first few months of a disability
  • Prefer lower monthly payments in exchange for a shorter term of benefit payments

Short-term disability insurance policies can have drawbacks, though. The benefit period often runs out within a few months. This leaves disabled people on their own for the long term. Short-term policies also tend to have fewer options and protections for payouts under circumstances such as:

  • The death of the policyholder
  • If the disability is work-related
  • If a policyholder becomes disabled close to retirement age

Advantages and Disadvantages of Long-Term Disability Insurance

Long-term disability insurance benefits provide payments for a disability lasting six months or longer. Some policies provide benefits until the policyholder reaches the age of 75 or older.

The primary advantage of long-term disability insurance is that benefits of up to 70% of the policyholder's salary will continue for the length of coverage. Also, long-term policies usually have a more extensive benefit period. They might cover hospital stays or allow for supplemental insurance.

Long-term disability policies usually have a longer elimination period. This is around three to six months or longer before the insurance company begins paying benefits. This leaves disabled people to pay their own expenses for the first months of a disability. They also might change payment plans after two continuous years of disability.

Long-term disability insurance is best for those who have savings. It also works for those who have other insurance to cover the first few months of their disability. It further helps workers who can pay higher premiums in exchange for long-term benefits.

Choosing Between Long-Term and Short-Term Disability Insurance

Long-term and short-term disability insurance policies provide different types of coverage. Workers who can afford it may buy both disability plans so they're completely covered. But this is often not an option, given the high costs usually involved.

People who can afford only one type of insurance coverage often opt for the long-term. They depend on their savings to cover the first months of a disability. The following can help you determine which one is best for you.

Long-Term Disability Insurance: Quick Reference

  • Duration of benefits: Up to age 75
  • Waiting period before benefits start: Up to two years, but usually three to six months
  • Amount of payments: Up to 70% of salary

Short-Term Disability Insurance: Quick Reference

  • Duration of benefits: Up to two years
  • Waiting period before benefits start: Zero to 14 weeks
  • Amount of payments: Usually 80% or more of salary for the first few payments. Lower for the remaining payments

If you're overwhelmed, consider seeking legal guidance. Personal injury can often intersect with disability claims. Personal injury lawyers can give insight. This is especially true in states like New York, with specific legal rules about disability.

For employer-sponsored benefits, an ERISA lawyer might be more suitable. Also, understanding workers' compensation (often called workers' comp) is crucial for work-related injuries. Always keep medical records, as they are vital medical evidence in these cases.

Get Legal Advice from a Disability Attorney

The process of filing a disability claim is overwhelming for anyone. If you have questions, contact a disability lawyer to learn more about private disability insurance.

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