Short-Term vs. Long-Term Disability Insurance: Understanding Key Differences

April 19, 2017

If disability strikes, leaving you unable to work, you will likely be faced with medical bills in addition to your regular monthly expenses. Unfortunately, things like housing, utilities, and transportation costs don't stop coming in just because your income stops. Fortunately, if you have disability insurance coverage, you will have a safety net to fall back on. Disability income insurance can provide the needed financial relief you require so you can continue paying your bills.

Types of disability insurance

There are two types of disability income insurance: short-term and long-term. If you are considering buying disability insurance , or if you are evaluating the adequacy of an existing disability insurance policy, it is important to understand the differences between the two.

While both short-term and long-term disability policies are intended to provide financial benefits in the event the insured person becomes disabled, there are no additional similarities between the two policies.

Waiting Periods

Disability income insurance policies have defined waiting periods - also called elimination periods. These terms constitute the time between when you become disabled and when benefit payments begin. Waiting periods are a key difference between short-term and long-term disability coverage.

Short-term Disability

Short-term policies are designed to pay benefits much sooner than long-term policies. Under most short-term disability plans, waiting periods range from zero to fourteen days. Some short-term policies have different waiting periods based on the nature of your disability, so there might be a shorter waiting period for disabilities arising out of accidents as opposed to disabilities resulting from illnesses.

Many employers offer short-term disability coverage that can kick in after an employee has exhausted a week of his or her paid sick leave (or unpaid time, if sick leave is not available.)

Long-term Disability

Under long-term disability insurance policies, waiting periods are generally much longer. The most common waiting period for a long-term policy is 90 days, although this can vary from as little as 30 days to more than two years!

You should understand what this means: if you become disabled and are unable to work, your long-term disability policy benefits are not available until after this period has passed. That means that you may need to rely on personal savings, short-term disability coverage or worker's compensation insurance (for a work-related injury) before your long-term disability policy is there to help ease the financial burden.

Coverage Periods

Another important distinction between short-term and long-term plans is how long coverage lasts once the elimination period is over and the policy kicks in.

Short-term Disability

Short-term disability policies, by definition, are designed for temporary disabilities. Policies differ, but short-term plans can provide coverage for three months, six months, a year, or even in certain (uncommon) policies, up to two years. If you can return to work before the end of the coverage period, coverage simply ends and benefits cease. If you remain disabled beyond the end of the defined benefits period, your benefits will end at that point.

Most short-term disability policies provide coverage for between two to six months.

Long-term Disability

In contrast, long-term disability coverage is insurance protection for long-lasting disabilities. Depending on the policy, long-term disability insurance may provide coverage for just a few years, until you reach age 65, or even for a lifetime.

Cost Differences

Because short-term disability insurance policies are designed to replace a portion of your income for a much shorter timeframe than long-term policies, they are generally less expensive.

Be sure to ask your financial professional about optional policy riders and available benefits. For example, you may be able to buy a policy with an option to increase coverage periodically in the future without having to show evidence of insurability. Choosing a policy benefit that is indexed for inflation can also help your benefit amount keep up as the economy changes.

Which Type of Disability Insurance is Best for You?

The best types of insurance coverage for you will depend on your specific financial situation, needs, goals, and any existing coverages you may already have.

Because there is no way of predicting the future and knowing whether you will become disabled, or foreseeing the type and duration of such a disability, the only sure way to protect yourself against any eventuality is to purchase both short-term and long-term disability insurance protection.

Of course, insurance costs money, and buying both types of policies is not always an option for everyone's budget. Most insurance professionals recommend purchasing long-term disability coverage because of the greater potential benefit it can offer in the event of a long-term disability.

Count on Symmetry Financial Group for Your Disability Insurance Needs

A disability can happen to any of us, at any time. At Symmetry Financial Group, our goal is to help our clients protect themselves and their loved ones through insurance solutions. We know that everyone's situation is different, so we never take a cookie-cutter approach to meeting your insurance needs. Instead, we will get to know you so we can understand your insurance needs, goals, and your budget. Then, we will shop our network of more than 30 insurance carriers to find you policy options that can provide coverage to give you and your loved ones valuable peace of mind.

If you would like to review existing insurance policies and coverages, or learn more about how disability income insurance could protect your financial obligations, contact the experienced insurance agents at Symmetry Financial Group. Fill out our easy online contact form to send us a message today!


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