Short & Long Term Disability Insurance Defined

You've worked hard to build a life for yourself, and you want to protect that. The right coverage can help protect your home, car, and family from the unexpected. It's helpful to consider what would happen if you became unable to work due to an injury or illness and if you would need to maintain your current lifestyle, including continuing to pay your mortgage and bills.

Short-term and long-term disability insurance can protect your financial well-being by replacing lost wages if an illness or injury prevents you from working. If your employer does not offer this coverage, or if you are self-employed, you can buy a personal policy, and an independent insurance agent can help you. Here's an extensive breakdown of short-term and long-term disability insurance and why each might be right for you.

Disability: Not Something to Leave to Chance

While you'd certainly never wish for a disability to happen to you or anyone you know, the facts are that it can happen, even when you least expect it. Check out the following stats for disabilities in the US and see for yourself:

• A reported 61 million Americans live with some disability.
• About one in four, or 26%, of American adults have a disability.
• A reported 13.7% of folks with disabilities find walking or climbing stairs seriously difficult.
• A reported 10.8% of folks with disabilities have serious difficulty remembering things, making decisions, or concentrating.
• A reported 6.8% of folks with disabilities have difficulty running errands alone.

Since disabilities are so prevalent in the US and can be debilitating, having the proper coverage in place can be critical for helping to keep life on track as much as possible.

What Is Short-Term Disability Insurance? 

Short-term disability insurance coverage is used as income replacement, since it replaces a portion of income lost while out of work due to an injury or prolonged condition like an illness. These policies typically have a waiting period of zero to 14 days before kicking in, and the maximum benefit period is two years. Coverage continues to pay out benefits until either the benefit period ends or you can resume working. A few reasons to go on short-term disability from your employer are if you suffered an injury like a broken leg that temporarily resulted in a loss of motion, had a baby, or came down with a short-term illness.

What Does Short-Term Disability Insurance Cover?

Short-term disability insurance provides coverage for a limited amount of time. You receive benefits after a short waiting period of up to two weeks. You are then covered for the length of time specified in your policy, which can be from several months up to two years.

Your policy will also indicate a maximum coverage amount. You'll receive benefits until you exceed the policy’s specified time limit or full coverage amount or until you recover. 

Short-term disability reasons for getting reimbursement policies can include:

• A lengthy illness
• A disabling injury
• The birth of a child

What types of illnesses are covered by short-term disability insurance?

• Cancer
• Mental health issues
• Musculoskeletal diseases
• Digestive disorders
• Back and joint disorders

An independent insurance agent can provide more examples of reasons for having short-term disability insurance.

What Is Long-Term Disability Insurance?

Long-term disability insurance coverage comes with a much longer waiting period before it kicks in, which can range from a few weeks to several months. The maximum benefit period is also much longer and can range from a few years to your death. A couple of reasons to take long-term disability from your employer include if you sustain a severe injury that leaves you unable to work for an extended period of time, such as a broken back, or develop a degenerative illness like Parkinson's disease.

What Does Long-Term Disability Insurance Cover?

Long-term disability insurance covers injuries and illnesses that prevent you from working. It does not cover the costs of childbirth, but short-term disability insurance can provide some income replacement after you have a child. Long-term disability insurance provides coverage over a much longer period than short-term disability coverage.

The Council for Disability Awareness lists the most common long-term disability claims as:

• Musculoskeletal/connective tissue disorders (back pain, osteoarthritis)
• Cancer
• Injuries/poisoning
• Cardiovascular/circulatory disorders (heart attack, coronary artery disease)
• Mental disorders

If you experience a debilitating injury, you may have a more extended waiting period before receiving benefits. Long-term disability claims typically take up to 90 days to process, or even longer. After your claim is settled, you can receive benefits for several years or until you recover. Some policies pay benefits for the rest of your life, although this varies by policy and insurer.

Which Type of Disability Insurance Is Right for You?

Protecting your financial future is important, but choosing the right policy can be tricky. Just as it's impossible to predict an illness or injury, it's also impossible to know how long one could keep you out of work or if you'd be able to return to work. A key difference between short-term and long-term disability insurance is that short-term policy premiums are much cheaper than long-term policies, since the payout isn’t as large and the coverage doesn't last as long. Long-term illnesses and injuries can devastate your finances. 

You may have enough savings to weather a month’s reprieve from work, but a three-year battle with cancer can drain resources quickly. If you must choose between long-term and short-term disability insurance, you may want to opt for a long-term disability policy, which offers significantly greater financial protection. An independent insurance agent can advise you on which coverage is the right choice for you and your unique situation.

What Do Disability Insurance Companies Need to Know?

When getting a disability insurance quote, you may need to provide information to your insurance company that you didn't need to provide for other policies. Your age and health status are the primary factors determining the cost of premiums. If you’re purchasing disability insurance services from a private company, you may also need to take a medical exam.

The insurance company may ask you to provide extensive information about your medical history to understand your risk factors. Your occupation and income are also information the insurance company will request to determine the appropriate amount of coverage for you. All of the information they consider will ultimately impact how much your coverage costs.

How to Buy Disability Insurance

Your employer may offer short-term and long-term disability insurance as part of your benefits package. While some employers pay for the entire premium, others deduct some or all of the premium from their employees’ pay. Alternatively, the employer might pay for coverage up to a specific limit and allow the employee to pay out of pocket to upgrade their coverage. For example, an employer might pay for a short-term disability policy with up to $10,000 in coverage but allow the employee to upgrade to a $20,000 policy by paying the additional cost themselves.

An employer-provided disability plan is the default choice for many people. It's important to know that employer-provided plans pay only 60% to 70% of your income. Choosing a plan of this type may leave you with less to live on at a time when you have additional expenses such as home health care or rehabilitation. It's also relevant to consider that bonuses and commissions aren't included as income in your disability compensation. Employer plans may also have monthly and annual caps. If you leave the company, your policy is likely to be canceled. An independent insurance agent can help you find a policy on your own if you don't have one through your employer or if you need to supplement their policy with additional coverage to meet your needs.

Questions to Ask Your Insurance Company

When seeking information about disability insurance, ask the insurance company questions to understand what you're getting. A few questions you might want to ask include:

• What constitutes a legitimate claim? It’s essential to understand what benefits you’d receive. Some insurers provide coverage for accidents but not for illnesses, even though illnesses are the leading cause of long-term disability.
• Can my policy be adjusted without repercussions? If you need additional coverage, you might have to undergo a medical evaluation again. If your health status declines, you may pay higher premiums. Ask your agent about add-on coverage, so you know what to anticipate in the event of this scenario.
• What is my specific waiting period? Your waiting period for benefits will affect when you can expect to start getting coverage from your policy. This can also help you determine how much money you should save to cover your living cost during your waiting period.
• Is my coverage occupation-specific? Some policies provide benefits if you can’t physically or mentally perform your job. This is known as an “own-occ” policy. Other policies only provide benefits if you can’t perform any job that fits your education and experience. This is an ”any-occ” policy. In general, own-occ policies are preferable to any-occ policies for most folks. 
• What incentives are offered with my policy? If you’re disabled, returning to work may be a challenge. Some policies offer programs that help you reacclimatize to the work arena and take control of your daily life.

An independent insurance agent can advise you about helpful questions to ask an insurance company, and even ask them on your behalf when searching for and choosing a short-term or long-term disability insurance policy.

Choosing a Disability Insurance Policy

Whatever your age or physical condition, injury and illness can create enormous financial challenges. Even a short-term disability can cause a substantial financial strain if you're unprepared. But if you have short-term or long-term disability coverage, you have a backup plan ready in case of disaster.

Why Choose an Independent Insurance Agent?

It’s simple. Independent insurance agents simplify the process by shopping and comparing insurance quotes for you. Not only that, but they’ll also cut the jargon and clarify the fine print, so you know exactly what you’re getting.

Independent insurance agents also have access to multiple insurance companies, ultimately finding you the best short-term or long-term disability insurance coverage, accessibility, and competitive pricing while working for you.