Income Protection

Long-term vs. Short-Term
Disability Insurance

When shopping for disability insurance, pay attention to whether the policy you are considering offers long-term or short-term disability benefits, and buy the policy that best suits your needs.

How do long-term and short-term disability policies differ?
Long-term and short-term disability policies, by definition, have different purposes. Short-term disability insurance is designed to pay you benefits sooner and for a shorter period of time than long-term disability insurance. Here are the two major differences between these policy types:

They offer different elimination periods under the terms of your disability insurance policy, you’ll have to wait for a certain period of time after you become disabled before you can begin receiving benefits. This waiting period is known as the elimination period. Some policies (typically short-term policies) even offer two elimination periods–a shorter one for accidents, a longer one for sickness. Elimination periods under short-term policies generally range from 0 to 14 days, depending on the terms of the policy. Elimination periods under long-term policies, on the other hand, are longer, ranging from 30 to 720 days, although a 90-day elimination period is most common. They offer different maximum benefit periods if you suffer a disability, you’ll receive benefits until you recover or reach a certain maximum. By definition, short-term disability policies pay benefits for up to two years, although many policies pay benefits for only three months, six months, or one year. Long-term disability policies, on the other hand, pay benefits for a far longer period–for a few years, up to age 65, or even for a lifetime.

Below are some FAQs that may help answer some of your questions. Click on the question to view the answer

Should I buy long-term or short-term disability insurance?

If you can’t afford to purchase both, it generally makes more sense to purchase long-term disability coverage. Even though most disabilities last only a short-time, you may be able to financially survive a short-term disability, even without insurance. On the other hand, without insurance, a long-term disability insurance can seriously threaten your finances.

However, consider these factors as well:

What other protection you have
If you suffer a disability, you may be eligible for benefits from a government-sponsored disability insurance program such as Social Security or workers’ compensation (if your disability was work-related). Your employer may also provide coverage, although employers offer short-term coverage more frequently than long-term coverage. Don’t buy a policy that duplicates coverage you already have elsewhere.

The type of coverage you can afford to buy
Consider what you can afford to buy. Short-term coverage is typically less expensive than long-term coverage because benefits are paid for a shorter period of time.

How do I buy a short-term or long-term disability insurance policy?

You can buy disability insurance through a private company that sells individual policies, or you can purchase group disability insurance through an association to which you belong or through your employer. Employers may also offer you a certain amount of disability insurance at no cost to you as part of your employee benefits package.