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Disability Insurance: Long-Term vs. Short-Term

Long-term disability and short-term disability insurance are designed to replace your income if you are unable to work because of sickness or an accident. Although long-term and short-term disability may be fundamentally the same, each type of insurance has a different purpose. Simply put, short-term disability is designed to pay benefits for shorter periods and a lot sooner than long-term disability. Continue reading for more detailed information about long-term and short-term disability insurance.

What is Short-Term Disability Insurance?

Short-term disability insurance pays you a benefit based on a percentage of your lost salary due to an injury or sickness. In most cases, you will have to be out of work for a few days and have exhausted all of your sick leave. With short-term disability, you will typically get paid a larger portion of your salary in the beginning. However, over a few weeks, your short-term disability payments will eventually be reduced to 60% of your salary or less. Short-term disability is ideal for major, but brief injuries or disabilities, such as injuries from an accident or a non-fatal sickness.

What is Long-Term Disability Insurance?

Long-term disability insurance is like most other types of insurance; it protects you from large catastrophic injuries or illnesses. Long-term disability becomes vital if you are away from work for a long period after you have exhausted your short-term disability. Long-term disability also covers other unfortunate happenings that prohibit your ability to earn wages. In most cases, long-term disability insurance picks up where your short-term disability policy ends. Some long-term disability payments last for 5 or 10 years. However, you should choose a policy that covers you until you turn 65.

Long-Term Disability vs. Short-Term Disability

With either long-term or short-term disability insurance, you will have to wait a certain period of time before you can start receiving benefits. In most cases, short-term disability policies will have short waiting periods, lasting up to 14 days. Some insurance policies also offer two different waiting periods: a longer one for sicknesses, and a shortened period for accidents. On the other hand, long-term disability insurance policies have longer waiting periods, which are typically 90 days but can range anywhere from 30 to 720 days.

Which Insurance Is the Best?

While most people purchase both types of disability policies, long-term disability is the best choice if you can only afford one. Since the majority of disabilities only last for a short period, you may be able to cover your expenses during that time without any additional income. However, if you were to become disabled for a long period, long-term disability can provide you with the income you need during the period.

Last Updated: April 14, 2015