When it comes to protecting your income in case of illness or injury, a common question arises: what exactly is short-term or long-term disability insurance? While their names sound similar, these types of coverage are different and can directly impact the security of your home and your family.
That’s why, before signing up for any plan, it’s important to understand which one is more worthwhile, how they work, and what their key differences are.
What Is Long-Term Disability Insurance?
Long-term disability insurance is the type of coverage that kicks in when a health condition prevents you from working for extended periods, months or even years. In some cases, this insurance can pay benefits until retirement age or even for the rest of your life.
There’s usually a waiting period before benefits begin, and it’s often longer than with short-term coverage. Benefits typically replace part of your income, generally between 50% and 70% of your previous salary.
It’s also important to note that certain long-term disability policies take into account the cause of the disability, whether it was due to a workplace or personal accident, during your commute, or while traveling. This makes it a more comprehensive policy that requires a thorough evaluation to ensure adequate protection.
What Is Short-Term Disability Insurance?
On the other hand, short-term disability insurance is designed for situations where you’re temporarily unable to work for a short period, such as a few weeks or months. In this case, benefits usually last up to two years. The waiting period to start receiving payments is much shorter, often between zero and 14 days.
In other words, unlike long-term disability insurance, all processes are quick and streamlined, as it’s intended to provide fast and accessible coverage. If something unexpected happens, the time between filing a claim and receiving benefits is generally much shorter.
Key Differences Between Long-Term and Short-Term Disability Insurance
Before making a decision, it’s essential to understand the main differences between these two types of disability insurance. Here are the most important ones and how they can impact your experience.
Coverage Duration
The most obvious difference between the two is coverage length. Short-term disability usually lasts from a few weeks to up to 24 months, while long-term disability can last for several years, or even a lifetime.
Coverage duration directly affects the price, scope, and contract terms, but in practice, it’s the main factor you should evaluate before choosing personal protection.
Elimination Period
While short-term disability insurance has a short waiting period, typically between 1 and 14 days, long-term disability insurance requires a longer elimination period before benefits start.
This is because it involves a more detailed evaluation, document verification, and the necessary procedures to ensure long-term assistance.
Percentage of Income Covered
Both types of coverage generally replace between 50% and 70% of your income, though this depends on the specific policy. The difference lies in how long benefits are paid, which directly affects the total amount you and your family could receive. This can be a significant factor when calculating long-term financial security.
Employer-Provided vs. Individual Plans
Many employers offer both types of coverage as part of their benefits package, sometimes at no direct cost to employees. However, long-term disability insurance is often purchased individually, while short-term coverage is more commonly provided by employers, considering the risks and payment requirements involved.
Do These Policies Work Together?
Short-term and long-term disability coverage not only work together, they complement each other. Short-term coverage starts right after the disability begins. If the condition lasts longer, long-term coverage takes over, ensuring continuous protection.
Although this combination requires more planning and potentially higher costs, it provides complete security and peace of mind.
Which One Is Better?
In reality, neither is “better” on its own, the ideal solution is to have both. Short-term disability offers quick support, covering the first days or months without work. Long-term disability is essential if the condition extends over time, protecting you up to retirement.
If you only have one type of coverage, you might be left unprotected at some point, without benefits during the first days (if you only have long-term coverage) or without income if the disability is long-lasting (if you only have short-term coverage).
Having both ensures immediate and long-term protection. In fact, in many cases, short-term coverage is activated first so that long-term benefits can start later without any gaps in protection. For this reason, it’s worth considering both types.
All information in this and other BOISLA articles is subject to change over time. Please check for updates directly with the institutions and companies mentioned. Approval is subject to the institution’s review.
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