You’ve decided to protect your income with a disability insurance policy. But the inquiry does not stop there: what type of disability insurance do you want? While eventually you’ll have to potentially evaluate features such as own occupation disability insurance, a guaranteed renewable policy, and non-cancelable disability insurance, today we’ll focus on a more preliminary decision: long-term or short-term disability insurance?
To start, we explore the difference between long-term and short-term disability insurance.
What is the Difference Between Long-Term Disability Insurance and Short-Term Disability Insurance?
In simplest terms, the difference between long-term and short-term disability insurance is the length of time they pay you benefits.
Short-term disability insurance, as you might expect, does not pay you benefits as long as long-term disability insurance. Usually you’ll see short-term disability policies that provide benefits for between three months and a year. A long-term disability insurance policy will typically pay you benefits for a much longer period of time – often until you reach age 65 (when social security kicks in).
While the coverage period for short-term disability insurance is shorter, it’ll pay you benefits sooner. With a short-term disability policy, your waiting period usually is less than 14 days. With a long-term policy, on the other hand, you’ll usually have a 90 day waiting period (although it varies by plan).
Is Long-Term Disability Insurance or Short-Term Disability Insurance Better?
So which policy should you buy? Ideally both. Usually your employer will provide short-term disability insurance. That’ll cover you for the first few months of your disability and then your long-term disability insurance will kick in once the short-term is exhausted.
But what if “both” isn’t an option? Then it makes more sense to protect yourself with long-term disability insurance. For starters, you might be able to get by without any insurance if you have a short term injury. You’ll likely receive sick leave from your employer, maybe even worker’s compensation if you were hurt on the job, and hopefully you have enough savings to last you a few months.
It’s a long-term injury that can really have the biggest impact on your financial stability. You probably don’t have multiple years’ worth of money saved up in the event you can’t work for 5-10 years, or even worse, if you suffer a permanent injury.
For more information, give us a call and one of our specialized disability insurance agents will guide you through a more indepth analysis of the differences between long-term and short-term DI. We’re also happy to provide you with a free, no-obligation disability insurance quote.
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