Long Term vs. Short Term Disability Insurance

Short-term disability insurance provides financial support for a short period. The duration often ranges from a few weeks to months.

On the other hand, long-term disability insurance provides coverage for a significantly longer period. It addresses serious illnesses that have a lasting impact. In some cases, the duration of coverage for long-term disability insurance lasts until retirement age.

This article compares long-term and short-term disability insurance policies. If you need help with a disability claim, discuss your policy and legal options with a disability law attorney.

What Is Disability Insurance?

Disability insurance is an insurance policy that offers income replacement when a person can’t work due to an illness or injury. You may get disability coverage through an employer-sponsored insurance plan or your own individual policy. These private plans differ from Social Security Disability Insurance (SSDI), which is a public program.

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 period.

Differences Between Short-Term and Long-Term Disability

While the duration of benefits is a key difference, that’s not the only factor to consider.

Another difference between short-term and long-term disability insurance is how the policy activates. Short-term disability insurance provides coverage almost immediately after a qualifying event. Meanwhile, long-term disability insurance often requires more rigorous medical documentation due to its extended coverage.

The premium payments for each type of insurance coverage may also vary. For short-term disability insurance, the premium payment often ranges from 1 – 3% of the employee’s yearly earnings. On the other hand, for long-term disability insurance, the premium payment costs range between 1 – 6%. Choosing what type of disability insurance to get often depends on your needs and financial situation.

Below is a quick overview of long-term disability insurance:

• 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

And here’s a summary of how short-term disability insurance works:

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

Advantages and Disadvantages of Short-Term Disability Insurance

Short-term disability insurance benefits cover people who cannot work for brief periods 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 may 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 have some 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 suitable for individuals with savings. It also works for those who have other insurance to cover the first few months of their disability. It benefits 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 offer different types of coverage. Workers who can afford both disability plans may purchase them for complete coverage. 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. A lawyer can help you determine which one is best for you.

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.