Most people don’t know the difference between short-term disability and long-term disability insurance coverage until they have to. These differences, however, can have a big impact on your way of life if you need to file a claim for benefits.
The right kind of disability coverage when you need it
Disability insurance is meant to replace a portion of your income if you are unable to work due to an illness or injury. It’s more common than you might think for someone to become disabled and unable to work at some point in their life.
As of 2017, one in four 20-year-olds can expect to be out of work for at least a year because of a disability before normal retirement age. Workers’ Compensation and Social Security Disability Insurance (SSDI) may not be enough to cover lost income during this time.
The type of disability plan you have will impact how much, when, and for how long you’ll receive in the form of disability benefits. Your plan will also impact the likelihood that your claim will be approved in the first place.
The differences between short-term and long-term disability
Short-term disability and long-term disability are not mutually exclusive benefits. It’s not an either/or choice because long-term disability plans will often pick up where your short-term disability left off.
The major differences come down to:
- The typical benefit amount you will be eligible to receive
- When you will be eligible to start receiving benefits after becoming disabled (i.e., the elimination period)
- The length of coverage (i.e., benefit period)
- What conditions qualify for coverage
While every policy may be set up differently depending on your situation, there are some concepts that generally apply.
Short-term disability insurance (STD) covers a percentage of your wages if you become temporarily unable to work due to illness, injury, or pregnancy.
STD policies will pay approximately 80-100% of your weekly gross income.
You can generally begin to receive benefits between one and 14 days after you become disabled.
STD benefits may last anywhere between three to six months, at which point long-term disability benefits may apply if you qualify.
Short-term disability is usually available through your employer’s benefit plan. However, you can also purchase short-term disability coverage on your own. If you purchase your own coverage, it is considered a stand-alone insurance policy. These individual plans can be quite expensive and may not cover work-related injuries.
These policies generally define disability liberally and cover a wide range of situations with few restrictions or limitations on coverage.
Some of the most common reasons for short-term disability claims:
- Pregnancies (25%)
- Musculoskeletal disorders affecting the back and spine, knees, hips, shoulders, and other parts of the body (20%)
- Digestive disorders, such as hernias and gastritis (7.8%)
- Mental health issues including depression and anxiety (7.7%)
- Injuries such as fractures, sprains, and strains of muscles and ligaments (7.5%)
Long-term disability insurance (LTD) covers a percentage of your wages when you become injured or seriously ill for an extended period of time.
Most LTD policies cover around 60% of your monthly gross income prior to becoming disabled. This does not include overtime, bonuses, or commission compensation. The length of coverage for your long-term policy is defined in your insurance policy documents.
Typically, your long-term policy will kick in once your short-term benefits have been exhausted. This is usually after around 90 days or three months.
LTD policies provide compensation anywhere from two years through age 65 or your Social Security retirement age, whichever is greater. This is only if you remain disabled under the policy, and your insurance company can at any time decide to deny your benefits.
LTD policies generally define disability more conservatively and contain a wide range of restrictions and limitations on the illnesses and injuries they will cover. Often, long-term disability policies will become much more difficult to qualify for after 24 months of coverage.
Read more: How Long Does Long-Term Disability Last?
Some of the most common reasons for long-term disability claims:
- Musculoskeletal disorders (29%)
- Cancer (15%)
- Pregnancy (9.4%)
- Mental health issues including depression and anxiety (9.1%)
- Injuries such as fractures, sprains, and strains of muscles and ligaments (9%)
Insurance companies are not on your side
It’s important to note that your insurance company will look for any excuse to deny your disability claim. This is the case no matter what type of claim it is, but especially when it comes to long-term disability claims.
That’s because insurance companies are not on your side. Their bottom line is their first priority.
Have you been denied your disability benefits?
At Roy Law Group, we have been battling disability insurance cases and nothing else since 2009. This area of law is incredibly complicated, and the insurance companies have endless resources available to battle your case. Let our team of experts help you. If we take on your case, you are in a winning battle.
Contact us to learn how we can help you today.
Source: Council for Disability Awareness