Understanding the difference between short-term and long-term disability insurance is essential for making informed decisions about your financial future.
If you’re facing a disability that impacts your ability to work, it can feel overwhelming. You may find yourself not only worrying about your health but also feeling the weight of financial stress as you figure out how to cover your everyday expenses.
In this article, we’ll share what you need to know about short-term vs. long-term disability, including waiting periods, benefit periods, and how to qualify for benefits. We’ll also explain how the two plans can work together to help you avoid any financial shortfalls.
You’re not alone in this journey, and understanding your options can help provide some peace of mind. Our team at Roy Law Group is here to support you if you have questions.
What we’ll cover:
- Short-term vs. long-term disability
- What does short-term disability insurance cover?
- What does long-term disability insurance cover?
- Insurance companies are not on your side
Short-term disability vs. long-term disability
The main difference between short-term disability and long-term disability insurance is the amount of time you must wait before benefits begin and the length of your disability coverage. Short-term disability coverage starts quickly but lasts a short period, while long-term disability has a longer waiting period (or elimination period), and coverage can last until retirement age.
Short-term and long-term disability can be used together or separately, depending on the circumstances. It is not an either/or choice. Long-term disability plans will often pick up where your short-term disability left off, allowing for a seamless transition from one benefit to the other.
Both of these types of disability benefits can provide critical financial assistance in the event of an unexpected medical event, allowing you to focus on taking care of yourself.
What does short-term disability insurance cover?
Short-term disability (STD) insurance covers a percentage of your wages if you temporarily cannot work due to illness, injury, or pregnancy.
STD benefit amount
Short-term disability benefits typically cover approximately 60-100% of your weekly gross income. This is paid out as a lump sum or in installments.
STD elimination period
You can generally begin to receive short-term disability benefits between one and 14 days after you become disabled.
STD benefit period
Short-term disability benefits may last between three to six months, at which point long-term disability benefits may apply if you qualify.
STD limitations
Short-term disability insurance is usually available through your employer’s benefit plan. However, you can also purchase coverage on your own. If you purchased your coverage, it is considered a stand-alone insurance policy. These individual plans can be pretty 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.
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%)
Read also: 7 Reasons Short-Term Disability Can Be Denied
What does long-term disability insurance cover?
Long-term disability (LTD) insurance covers a percentage of your wages when you become injured or seriously ill for an extended period.
LTD benefit amount
Most long-term disability policies cover around 60% of your monthly gross income before becoming disabled. This does not include overtime, bonuses, or commission compensation. Your insurance policy documents define the length of coverage for your long-term policy.
LTD elimination period
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 benefit period
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 decide to deny your benefits at any time.
Read more: Why Long-Term Disability Claims Get Denied
LTD limitations
LTD policies generally define disability more conservatively and contain many restrictions and limitations on the medical conditions they will cover. Often, long-term disability policies will become much more difficult to qualify for after 24 months of coverage.
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%)
Read more: Medical Conditions That Qualify For Long-Term Disability
Insurance companies are not on your side
It’s important to keep in mind that insurance companies will go out of their way to find any reason to deny your disability claim. This applies no matter what kind of claim, but it is especially true for long-term disability claims. The insurance company’s interests are not aligned with yours, and they will instead focus on their profits.
Because your insurance company is not on your side, it’s critical to be prepared and ensure all paperwork is accurate and submitted on time. They will be looking for any discrepancies they can use to deny your claim. Additionally, you should also be aware of the different legal requirements for filing a disability claim, as well as any state-specific laws or regulations that may be relevant.
Finally, having a knowledgeable and experienced disability attorney can be invaluable in helping your claim to be successful.
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 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 for disability statistics: Council for Disability Awareness
This post was originally published on November 16, 2017 but has since been updated for accuracy and relevancy.