Understanding Short-Term and Long-Term Disability Insurance

Understanding Short-Term and Long-Term Disability Insurance

Kim Pinnelli

by Kim Pinnelli
Senior Contributing Writer

Updated September 14, 2020
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Understanding Short-Term and Long-Term Disability Insurance

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Learn the difference between long and short-term disability to choose the right policy for you.

Are you protected against the unexpected? What would happen if you fell ill or injured and were unable to work? Workers’ compensation only works in specific situations and Social Security Disability benefits can be hard to get and takes a long time. How would you pay for housing, food, and basic bills?

The safest bet to protect against this possibility is to consider short-term or long term disability insurance – and Breeze can help you get Long-term coverage for as little as $9 per month.

What is Long-Term Disability?

Long-term disability lasts for years; you may find it in increments of 2, 5, 10, or lifetime coverage benefits. Long-term disability has a longer elimination period before the benefits are available.

The average company requires 90 days, but the wait can be as long as two years, which is why short-term disability is a nice way to offset this time. The longer the elimination period, the lower the policy costs in general.

Long-term benefits typically cover up to 60% of your take-home pay. Your premium depends on the length of the policy purchased, your age, health, and occupation. You can get a quote for disability coverage in a few minutes.

Benefits of Long-Term Disability

  • Benefit payments are your to use as you need, and are not subject to income tax
  • It keeps your retirement savings intact should you become disabled before retirement

What is Short-Term Disability?

As the name suggests, short-term disability lasts for a short time – typically three months to a maximum of one year. Disability coverage starts after a short waiting period known as an elimination period, the average of which is 14 days. This means you don’t get coverage for the first two weeks of your disability.

Short-term disability covers a portion of your take-home income, with a maximum of 80% in most cases. You can often get short-term disability through your employer as a group policy or purchase an individual policy yourself.

Benefits of Short-Term Disability

  • It can complement long-term disability as you go through the waiting period
  • Your employer may cover some or all of the premium
  • It may prevent financial distress if you don’t have an emergency fund

Difference Between ‘Own Occupation’ vs ‘Any Occupation’ Coverage

There are two more terms you need to understand when deciding between short-term and long-term disability – own occupation and any occupation disability.

A policy with ‘own occupation’ coverage will pay benefits as long as your disability prevents you from going back to work in your current occupation. Your policy will kick in after the exclusion period because you can no longer do your primary job. This is the most common policy, but it also costs slightly more.

Any occupation coverage means that your disability prevents you from working any job, even one that pays less than you make now. This is much broader coverage and costs less because an insurance company’s risk of paying out is less, since chances are you can find another job you can do even with your disability.

The difference between short-term and long-term disability includes the benefit period, amount you receive, and the premiums.

Weigh the pros and cons of each policy type, as well as the cost, when deciding which option is right for you – and be sure to get a free quote so you can make an informed decision.