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Long Term vs. Short Term Disability Insurance

Disability insurance is an insurance policy that covers some of an individual's lost income while that individual is unable to work due to an illness or injury. Some disability insurance policies cover workers for a short period of months, while others provide stable benefits for decades. Deciding whether to get short term, long term, or both types of disability insurance depends on the individual worker's needs, expectations, and budget.

Advantages and Disadvantages of Short Term Disability Insurance

Short term disability insurance is intended to cover individuals who cannot work for brief periods of time. Although some short term policies can last for up to two years, the typical policy lasts between three and six months.

Because the length of time over which these policies pay benefits is relatively small, short term disability insurance policies are usually the most affordable options. Additionally, they tend to begin paying benefits immediately or within the first two weeks once the policy holder has become disabled, and they typically pay close to 100 percent of a worker's salary for the first few payments.

Short term disability insurance policies can have drawbacks, however. Benefits run out within a few months, leaving disabled individuals on their own for the long term. Short term policies also tend to have fewer options and protections for payouts under certain circumstances, such as the death of the policy holder or a policy holder becoming disabled close to retirement age.

Despite these tradeoffs, short term disability insurance may be your best 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

Advantages and Disadvantages of Long Term Disability Insurance

Long term disability insurance provides monthly payments in the event of a disability lasting six months or longer, and some policies provide benefits until the policy holder reaches the age of 75 or older.

The primary advantage of long term disability insurance is the peace of mind that comes with knowing that benefits of up to 70 percent of the policy holder's salary will continue as long as a disability lasts. Additionally, long term policies usually allow for more options, such as coverage for hospital stays and adding supplemental insurance to increase monthly payments.

The main drawback of long term disability insurance is that long term policies cost substantially more than short term insurance. Furthermore, long term policies usually have a waiting period of between three and six months or longer before the insurance company begins paying benefits, leaving disabled individuals to pay their own expenses for the first few months of a disability. Finally, the payment plans of some long term disability policies may change after two years of continuous disability.

Because of these advantages and disadvantages, long term disability insurance is typically best for individuals who have savings or other insurance to cover the first few months of their disability, and workers who can afford higher premiums in exchange for long term benefits.

Choosing Between Long Term and Short Term Disability Insurance

Since long term and short term disability insurance policies provide different types of coverage, workers who can afford it may buy both in order to be completely covered in the event of a disability. However, this is often not an option, given the high costs that are usually involved.

People who can afford only one type of insurance coverage often opt for the long term and depend on their savings to cover the first months of a disability. The following guides can help you evaluate the different aspects of short and long term disability insurance policies to 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 percent 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 percent or more of salary for the first few payments, then lower for the remaining payments

Need Help Filing a Disability Claim? Get Legal Help Today

With so many different types of disability insurance, options, and involved parties, the process of filing a disability claim can be overwhelming for anyone without a law degree. If you have questions, you can learn more on FindLaw's disability law legal answers page. You can also contact a disability lawyer to learn more about private disability insurance or an ERISA lawyer for questions regarding employer-sponsored disability benefits.

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