Long-term vs. Short-Term
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 answerShould I buy long-term or short-term disability insurance?
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?