Disability insurance can be provided by many employers, by the Federal government, and by purchasing a private policy directly through an insurance broker or carrier.

With both short-term and long-term disability insurance, the amount of disability insurance provided to workers will depend on certain factors such as company/government policies. While the government offers some disability benefits, it’s often hard to get your claim approved, and the amount of benefits is typically very low. That’s why a private disability insurance policy is something important to consider purchasing. 

If you are curious about short term and long term disability insurance differences, in this article you will find out everything you need to know.

So, what is the difference between short-term vs long-term disability insurance?

A general outlook on short and long-term disability

Short-term Disability

A disability can be qualified as short-term if it prevents you from working and carrying out your job for a few weeks or months. However, the disability itself must be diagnosed by a medical or healthcare provider, and you need to show proof that you don’t have a pre-existing condition preventing you from working. It’s great to know short term disability insurance rates as well.  A few conditions that can be classified as short-term disability are:

• Pregnancy
• Recovery from surgery
• Back disorders
• Joint disorders
• Non-work related injury
• Short-term illness

Depending on the policies of an insurance carrier, a few other conditions may also be included or excluded under the short-term disability category, such as drug addiction, and mental health-related conditions. 

Long-term Disability

If a certain condition affects your mental, physical, or emotional health for more than a period of 12 months, it can be classified as a long-term disability.

When it comes to a long-term disability, there might be different classifications for it, all of which are determined by the type of work that an individual does. For instance, a major leg injury may be considered a long-term disability for a construction worker; however, it does not hinder an individual with a desk job from working, so depending on your occupation, you might be able to make legitimate claims on your policy benefits, while others may not.  A few conditions that can be classified as a long-term disability are:

• Chronic pain
• Back pain
• Stroke
• Diabetes
• Cancer
• Heart Disease
• Anxiety and Depression
• Epilepsy
• Parkinson’s Disease 

What is short-term disability insurance?

Short-term disability insurance is a policy that provides workers with a specific percentage of their income for the time being they are unable to work due to an illness or ailment. 

Who is eligible?

To be eligible for short-term disability insurance, a healthcare provider or a medical professional needs to determine that an employee is unable to carry out the tasks required in their job due to a disability. Instances where an employee may be pregnant, recovering from surgery, or dealing with chronic pain will allow them to be eligible for receiving benefit proceeds from short-term disability insurance. 

Injuries as a result of workplace tasks, or injuries that occur on the job are different.  In situations like this, an employee will not be compensated through short-term disability insurance that’s offered by their employer. In cases like this, most employers are required to provide their employees with workers’ compensation according to state laws and company policies. Pre-existing conditions, such as previously diagnosed mental health conditions might also be excluded when it comes to short-term disability insurance.

The covering period

The amount of time that employees are compensated through short-term disability insurance varies from company to company. Typically, a worker will be compensated for 3 to 6 months, or up to a year, depending on the policy.

Different policies

As mentioned above, when it comes to disability insurance that’s offered by an employer as part of an employee’s benefits, there is no fixed amount of income that will be compensated to an employee under the short-term disability insurance program. Instead, a specific percentage of their income will be provided to them, for a specific amount of time (usually less than a year).

For short-term disability plans, there is usually a waiting period of up to 7 days, but typically no longer than 7 days, where during that time employees are educated on how to make the best use of these benefits, and of course they will be strongly advised against abusing these benefits. Usually, 60-70% of an employee’s income is provided to them under a short-term disability program. Various other benefits such as health benefits or sick leave may also be added to this percentage of income, all while making sure that the amount of benefits provided to the employee does not exceed their total income for a month.  Again, the details of the specifics will vary among insurance carriers and plans. 

There are some states where employers are required to offer short-term disability plans to their employees, namely: New York, California, Rhode Island, New Jersey, and Hawaii. However, some employer offered plans may not be enough coverage to offset your expenses in case you suffer a disability, so you should do some research and see if you need a private, individual policy. Employers in other states may offer short-term disability plans to their employees if they wish to. 

Features

Typically, a short-term disability plan includes the following features:

• The amount of benefit received: This is the amount that you receive, which won’t be your entire income, but a percentage of it (around 50-80%). Some short-term disability plans may have additional benefits, with the number of benefits being a higher percentage in the first few months (e.g. 80% in the first three months) and then slowly decreasing in the following months (e.g. 70% or 60% in the remaining months).

• Premium amount: This will be the amount you pay on a monthly basis to your insurance provider. 

• Elimination period: The elimination period, usually between 7-14 days, is the amount of time you have to wait before you can start receiving benefits from their short-term Disability program. 

• Benefit period: This is the period during which you will be receiving your benefits. Typically, a benefit period lasts no more than a year for short-term Disability Insurance. 

What is long-term disability insurance?

Long-term disability insurance is designed to offer benefits for a longer period, and benefit periods are normally the following timeframes in years: 5, 10, 20, and can also be up till the age at which you retire.  The number of years you will receive long-term disability plans depends on your plan.

Who is eligible?

To be eligible to utilize the benefits associated with a long-term disability policy, you must be unable to fulfill the job requirements of your specific role where you work.  

As examples, an injury that lasts for more than 26 weeks, cancer treatments, and chronic pain are a few conditions that may also qualify for benefits eligibility for long-term disability insurance.

The coverage period

The amount of time that employees are compensated through long-term disability insurance plans varies from company to company. Typically, a worker will be compensated for 5 to 10 years, or more. An employee can also be compensated up until their retirement age, depending on the insurance policy that they acquire.

Different policies

Permanently disabled individuals may get long-term disability insurance until their typical retirement age or until they become eligible for Social Security disability benefits, while some programs offer greater restricted income replacement benefits, such as for up to 24 or 36 months. When available, paid LTD income benefits are combined with income from other sources.

Employees of companies that offer a long-term disability policy will be qualified for long-term disability insurance after a waiting period (usually of 3 to 6 months). It is also reported that a large number of employers pay the whole amount for LTD insurance coverage, with more than seven out of ten businesses (72%) saying they provide a group long-term disability plan to their workers. However, it’s important to understand what is covered and details of the terms, as it might still not be enough depending on your situation.

Just like with short-term disability, long-term disability also does not offer job protection to its employees. If an employee takes a leave of absences from work and needs to access disability benefits, then they may or may not be able to have their job back when they are able to work again. Whether an employee can retain their job will be completely dependent upon the practices of their employer, and their company policies. So even if you have some form of disability insurance from your employer, you may eventually lose your job and then receive the associated disability benefits. That’s why it’s important to have a private disability insurance policy so you can make sure that even if you do lose your job you will have coverage if you are experiencing a disability.

Features

Here are the key features of a long-term disability Insurance plan:

• The amount of benefit received: This will typically be 50-80% of your pre-disability earnings. There might be a few additional benefits that you can receive with long-term disability insurance, however, the amount of benefits received by an employee will not be more than 100% of their basic salary.

• Premium amount: The premium amount is the amount paid by either yourself or your employer to your insurance provider, depending on whether you have a private policy or one offered by your employer.

• Elimination period: The elimination period, usually 90-180 days, is the amount of time you have to wait before you can start receiving benefits from your long-term disability program. 

• Benefit period: This is the period during which you will be receiving your benefits. Typically, a benefit period lasts for 2, 5, or 10 years. In the case of long-term disability insurance, you can also receive benefits up to the retirement age.