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Differences between short-term and long-term disability insurance

On Behalf of | Oct 5, 2023 | Disability Benefits |

In today’s fast-paced world, where uncertainties abound, protecting your financial well-being is crucial. One way to better ensure that your needs are met even if things go terribly wrong involves investing in disability insurance coverage. Disability benefits are a financial safety net that replaces the income of workers who cannot report to work due to illness or injury.

This coverage helps to ensure that workers maintain their living standards and meet their financial obligations, even when they can’t work. However, not all disability insurance is created equal. There are distinct differences between short-term and long-term disability insurance policies, each serving distinct purposes and offering unique benefits. As a result, you’ll want to understand the coverage you’re being offered by an employer before you accept it.

The primary distinction

Short-term disability insurance (STD) is designed to cover employees for a limited period, usually ranging from a few weeks to a few months. This makes it ideal for addressing temporary medical conditions or injuries. Most STD policies have a waiting period before benefits kick in, usually from zero to 14 days. This waiting period helps ensure that employees receive benefits only when their disability is expected to last beyond a short recovery period.

Long-term disability insurance (LTD), on the other hand, is designed to provide coverage for more extended periods, often stretching for years or even until retirement. This extended duration can ensure financial stability for individuals facing long-term disabilities. Unlike STD, long-term disability insurance policies typically have longer waiting periods, often ranging from 90 days to six months. This reflects the expectation that the disability will be of a more prolonged nature.

Benefit amount

STD policies typically replace a significant portion of an employee’s income, often around 60% to 70%, during the covered period. Conversely, LTD policies generally replace a slightly lower percentage of an employee’s income, typically around 50% to 60%. However, the extended coverage duration helps to make up for the lower replacement rate.

If you ever find that you need to apply for short or long-term disability insurance, you should engage a seasoned legal professional for guidance to help minimize any chances of your application being denied. After all, benefits are of little use to anyone if they can’t be accessed properly and to the degree that one requires.