The Key Differences between Short-term and Long-term Disability Insurance
Short-term and long-term disability insurance are two types of coverage that provide financial protection in the event of an individual’s inability to work due to a disability or injury. Here’s a brief summary of the key differences between the two:
Coverage Duration:
- Short-Term Disability Insurance: This type of insurance typically provides coverage for a relatively short period, often ranging from a few weeks to a few months. It is designed to bridge the gap between the onset of a disability and the start of long-term disability benefits or a return to work.
- Long-Term Disability Insurance: Long-term disability insurance, as the name suggests, offers coverage for an extended duration. It comes into play when an individual’s disability extends beyond a certain timeframe. Long-term disability benefits can last for years, or even until retirement age, depending on the policy terms.
Waiting/Elimination Period:
- Short-Term Disability Insurance: Short-term disability policies typically have a shorter waiting or elimination period before benefits become payable, often as short as a few days to a few weeks.
- Long-Term Disability Insurance: Long-term disability policies usually have a longer waiting period before benefits kick in. This waiting period can range from a few weeks to several months.
Coverage Amount:
- Short-Term Disability Insurance: Short-term disability insurance typically provides a higher percentage of the individual’s pre-disability income compared to long-term disability insurance. Benefits often cover a significant portion of the individual’s salary for the short-term duration.
- Long-Term Disability Insurance: Long-term disability insurance provides a lower percentage of the individual’s pre-disability income, but it covers a more extended period. While the benefit may be lower, it ensures income protection for a more extended disability period. Unlike short-term disability benefits, long-term benefits may be impacted by Social Security Disability Income benefits.
Types of Disabilities Covered:
- Short-Term Disability Insurance: Short-term policies often cover disabilities resulting from pregnancy, illness, injury, or surgery with shorter recovery times. They are suitable for temporary health issues that prevent individuals from working for a limited period.
- Long-Term Disability Insurance: Long-term disability policies cover more severe disabilities that last for an extended period, such as chronic illness, disability resulting from accidents, or conditions that may lead to permanent disabilities.
Both types of insurance play essential roles in safeguarding an individual’s financial well-being during times of disability, and they can complement each other to provide comprehensive coverage.