Short Term vs Long Term Disability – Overview
Disability insurance can be considered a safety net to support employees who can not perform their job due to some injury or illness. Both long term and short term disability insurance have different purposes. The type of insurance entirely depends on the situation and the employee’s condition.
What Is Short Term Disability Insurance?
Short term disability insurance generally covers around 40 to 70% of their previous salary. They offer these benefits for a short time when that person cannot perform their duties due to some injury or severe medical conditions.
Employees must prove they cannot perform their job with medical documents to receive their benefits. Conditions like injury from any accident, surgery, rehabilitation, or pregnancy are qualified to apply for these insurance benefits. The medical condition of the employee, the injury, or the illness does not need to take place on their job to receive the benefits.
Long Term Disability Insurance
Long term disability insurance covers 60% of the total income of an individual for an extended period. Long term disability benefits are provided to those people who are unable to perform any job for a long time. The length of the insurance coverage can last from two years to retirement or till the time social security payments commence.
Conditions like mental illness, cancer, back problems, arthritis, stroke, or any other severe condition, that can prevent an individual from performing day-to-day tasks are qualified to apply for the benefits. That person should submit their medical records with all additional documents to prove their medical condition. They can continue receiving their benefits until they are medically cleared.
Differences Between Short Term and Long Term Disability Insurance
Both short term and long term disability insurance have some similarities. They both cost around 1% to 3% of your annual income. However, they have significant differences as well.
Short term and long term disability insurance differ based on the length of the insurance coverage period. When an individual is injured or severely ill but they can return to their work after a certain period, a short term disability is more suitable for them.
Whereas individuals who will not be able to work for a longer period or even permanently due to some injury or chronic condition, long term disability insurance is more suited for them.
Long term and short term disability insurance can cover different portions of a person’s income. Short term disability insurance can cover around 80% of their previous income. Whereas long term disability insurance cover around 60% of their previous income.
2. Waiting Period
Both disability insurance policies have a certain waiting period, also called the elimination period. It indicates the time you have to wait before receiving the benefit amount. This waiting period also depends on your conditions as well.
Short term disability benefits do not take much time to deliver soon after your application is approved. It takes a maximum of one to two weeks to deliver the benefits.
However, long term disability benefits take a longer time. The waiting period here can be three to six months. If you have an insurance plan that includes both long term and short term benefits, you will start receiving long term benefits once your short term ends.
Short term disability benefit lasts for a shorter period. The coverage span can depend on the policy you have chosen. The maximum you can receive the benefits is three to six months. If you need these benefits for longer, you must seek different disability insurance plans. However, long term disability insurance can offer your benefits until you are medically cleared. It can last until you are 65 years old.
Short Term vs Long Term Disability – Advantages
Short term disability insurance can be your best option in certain situations:
- If you have long term disability coverage to back you up
- If you have limited savings to help you the first few months of your condition
- If you prefer short term benefits in exchange for lower monthly payments
- The waiting period for receiving short term benefits is not long
Some of the benefits of long term disability insurance are:
- Long term disability insurance continues delivering the benefits until the disability lasts or until you are 65 years old.
- It can offer up to 70% of your gross income.
- They also offer additional benefits like hospital stay coverage and supplemental insurance that can increase your monthly payments.
Short Term vs Long Term Disability – Disadvantages
There are certain disadvantages to short term disability insurance:
- Some of the short term benefits can last for two years. However, most of them last up to six months.
- The policy benefits are relatively small. They have fewer options and protections under the circumstances like the policyholder becoming disabled close to the retirement age or the death of the policyholder
Some disadvantages of long term disability insurance:
- It costs more.
- They have a longer waiting period. It can take three months to one year before they start offering benefits.
Both short term and long term disability insurance have multiple advantages and disadvantages. You can always choose the appropriate plan according to your requirements and our expectations. Short-term disability insurance is easy to receive and does not cost much.
However, the benefits you receive from them are limited, and the coverage time is also low. Long term disability insurance is more costly and takes more time to offer the benefits. With long term disability insurance, you can receive more benefits for a longer period.