Short Term vs Long Term Disability – Overview
Disability insurance can be considered a safety net to support employees who can not perform their jobs 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 60% to 70% of the employee’s 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 jobs with medical documents to receive 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 typically covers 50% to 70% of the employee’s previous income 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 long-term disability insurance coverage can vary, often until retirement age, but it is not directly tied to the commencement of social security payments.
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
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 coverage period. When an individual is injured or severely ill but can return to work after a certain period, a short-term disability is more suitable.
whereas long-term disability insurance is more suitable for individuals who will not be able to work for a longer period or even permanently due to an injury or chronic condition.
1. Coverage
Long-term and short-term disability insurance can cover different portions of a person’s income. Short-term disability insurance generally covers 60% to 70% of the employee’s previous income, while long-term disability insurance covers 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 longer. The waiting period 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 benefits end.
3. Length
Short term disability benefits last for a shorter period. The coverage span can depend on the policy you have chosen. The duration for short term disability benefits typically ranges from a few weeks to one year, depending on the policy. If you need these benefits for longer, you must seek different disability insurance plans. Long term disability insurance benefits can last from a few years to up to retirement age, depending on the policy, not necessarily until you are medically cleared.
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.
- This statement is unclear about which “they” refers to; long term disability policies may offer various benefits, but specifics such as hospital stay coverage and supplemental insurance depend on the individual policy and should be verified for accuracy.
Short Term vs Long Term Disability – Disadvantages
There are certain disadvantages to short term disability insurance:
- Short term disability benefits typically do not last for two years; the maximum is usually up to one. However, most of them last up to six months.
- The policy benefits are relatively small. They have fewer options and protections under circumstances like the policyholder becoming disabled close to the retirement age or the death of the policyholder
Some disadvantages of long term disability insurance:
- Long term disability insurance typically costs more than short term due to the extended coverage period and higher benefit payout.
- The waiting period for long term disability benefits typically ranges from 90 days to 180 days, not up to one year.
Conclusion
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.
See Also
Is Long Term Disability Taxable
Signs That You Will Be Approved for Disability
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