What’s the Difference Between Short and Long-Term Disability Insurance?

What’s the Difference Between Short and Long-Term Disability Insurance?

Kim Pinnelli

by Kim Pinnelli
Senior Contributing Writer

Updated September 14, 2020
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What’s the Difference Between Short and Long-Term Disability Insurance?

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Short-term and long-term disability insurance protects your ability to earn an income if you are too sick or injured to work.

If you become unable to work, you could find yourself in financial distress if you don’t have short-term or long-term disability insurance. Workers compensation may cover you if you are hurt on the job and social security disability income may be an option if you are severely disabled, but neither will cover you in the long term.

Your best bet is to protect yourself from the unknown. If you do get hurt and are unable to work, how would you cover your bills and living expenses? Short-term and long-term disability insurance are great options designed to help in this situation.

What Counts as a Short-Term Disability?

Short-term disability, as the name suggests, protects you in the short-term – typically one year or less. Short-term disability insurance typically covers the following incidents:

  • You suffer a spontaneous injury (not at work)
  • You need surgery
  • You had a baby

What Counts as a Long-Term Disability?

A long-term disability puts you out of work longer than 6 months to a year. Long-term disability insurance benefits kick in after your short-term disability expires and will cover some of the following:

  • Mental health disorders
  • Long-term illnesses, such as cancer
  • Heart attack or stroke
  • Accidents
  • Back issues

How do Short-Term and Long-Term Disability Work?

Both short-term and long-term policies have an elimination period or waiting period. This is the time you must wait for the policy to kick in or start paying you. In other words, it’s the time you’ll go without pay. Short-Term Disability Insurance typically has a 14 day or less elimination period while Long-Term Disability Insurance has a 90 – 180 day period. Both don’t go into effect until you run out of sick days at work.

Short-term policies typically cover 80% of your income and long-term policies cover 60% of your income. The nice thing about disability pay is that it’s not taxed, so the amount you bring in will be similar to what you brought home after taxes while working.

Both Short-Term Disability Insurance and Long-Term Disability Insurance pay you weekly for your coverage period. You can receive benefits until you return to work or fully recover. If you retire before you fully recover, you can start collection social security or retirement benefits.

What’s the Cost?

Disability insurance can get costly. Your premium depends on your age, health, and occupation. Short-term disability can be cost prohibitive since it provides coverage for such a short period. Most people that have Short-Term Disability Insurance have it through their employer. Some employers cover the entire cost, while others pay part of it while you pay the rest.

If you were to choose a policy to pay for on your own, long-term disability often makes more sense. It protects you financially in the long-term, making your premiums worth it rather than paying large premiums for coverage that only lasts a few months.

Should you Get Disability Insurance?

If your employer offers disability insurance, take it. However, the policy is only in effect while you remain employed. If you change jobs, you lose the insurance. If you are the only income-earner in your household or your family relies on your income, purchasing a disability insurance policy can help protect you and your loved ones should you become disabled.