An Honest, Clear Voice In SSI/SSDI Care

Long-term vs. Short-term disability insurance

On Behalf of | Jun 21, 2024 | Uncategorized

No one wants to imagine being struck down by illness or injury that compromises their livelihood. However, it’s an unfortunate reality for many Americans, most of whom get overwhelmed by medical bills when their regular income disappears. Thankfully, disability insurance can be a financial lifeline for many individuals in such situations.

Individuals whose disabilities have robbed them of the ability to work can potentially qualify for short-term or long-term disability insurance. What are the key distinguishing criteria between short-term and long-term disability insurance?

The coverage divide

From their names, the core distinction between long-term and short-term disability insurance is how long the coverage is set to last. On one hand, individuals who sustain temporary disabilities may be eligible to receive short-term disability insurance payments. On the other hand, individuals whose injuries or illnesses result in permanent disabilities may be eligible for long-term disability insurance.

Usually, there is a waiting period before injured individuals can start receiving benefits. This recovery period is allotted to ascertain that the illness or injury certainly resulted in a disability. Suppose an individual ends up with a temporary disability; they can expect to receive benefits for three months to a year.

Conversely, if an individual comes out of recovery with a partial permanent disability, they can anticipate their benefits to last between two to five years. However, if the disability is completely permanent, they may qualify for long-term disability insurance even until retirement age.

Benefit levels and premiums

Typically, short-term disability insurance payments are more than long-term disability payments because they last for a shorter duration. Individuals can expect almost 100% replacement of their income. This can help meet such individuals’ immediate financial needs, most of which are medical bills.

On the other hand, individuals with permanent disabilities can expect up to a 70% salary replacement. While this is a smaller safety net compared to short-term disability insurance payments, recipients can expect to receive regular payments over an extended period. This can help ease any anxieties about long-term financial hardship that might accompany a permanent disability.

Both short-term and long-term disability insurance are invaluable resources for protecting individuals’ financial well-being in the event of a disability. Understanding the differences between them helps to ensure that individuals are adequately prepared for both temporary and long-term income loss due to disability.