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Short-Term Disability vs. Long-Term Disability

Short-term disability and long-term disability are both coverages worth exploring. Knowing the differences between them is a crucial first step in determining the policy that meets your needs.

Who Needs Disability Insurance?

Anyone who earns their income from a job and has recurring expenses will benefit from disability insurance. You should especially consider disability insurance if you are your family’s sole source of income or you have minor children and other dependents. However, workers of all ages and household sizes have bills that will continue to roll in even if they are sick or injured.

Do You Need Disability Insurance If You’re Young and Healthy?

The short answer is, “probably.” If you’ve never had a serious illness or injury, it can be difficult to imagine being incapacitated in any way. However, out of today’s 20-year-olds, one in four will have a disabling condition that prevents them from working for at least a year. A young adult in the prime of their life may have a mortgage, car payment, and student loans. It can be difficult to recover financially if you are sick or injured. Disability insurance allows you to stay independent through tough times.

How Does Workers’ Compensation Insurance Differ From Long-term Disability Insurance?

Employers offer both types of insurance, but workers’ compensation and disability insurance payout benefits under very different circumstances.

Workers’ Compensation Insurance

Workers’ compensation insurance will only pay you benefits if your injury or illness is work-related. For example, if you broke your foot at work or developed repetitive stress injuries from doing on the job-related tasks.

With a few exceptions, employers are required by law to carry workers’ compensation insurance. Employees are automatically covered and do not have to enroll. The employer pays the premiums at no cost to the employee. Workers’ compensation benefits pay for lost wages and medical expenses.

Disability Insurance

You receive short-term disability and long-term disability benefits for illnesses and injuries that prevent the insured from doing their occupation or any occupation by which they are trained, educated, or suited. For example, you may have pregnancy complications or sustain injuries in a car accident.

Employers offer disability insurance as part of their benefits package but are not required to do so. Some employers split the cost of premiums with their employees. If you are self-employed, you can purchase your own private short-term and long-term disability from an insurance company. Disability insurance is meant to replace lost income, so you choose how you spend your benefits.

Can You Receive Workers’ Compensation and Disability Insurance?

You can generally receive short-term or long-term disability and workers’ compensation at the same time although most group policies offset dollar for dollar for workers compensation from your monthly benefit. Your disability insurance policy will state whether you can receive simultaneous benefits.

If you are injured in the course and scope of employment, workers’ compensation should pay out benefits. If you are denied workers’ compensation, don’t assume that disability insurance should then provide coverage. Speak with an attorney if workers’ compensation challenges or denies your claim.

How Long Will It Take To Get Benefits?

Short-term policies can provide benefits more quickly than long-term disability policies. However, most short-term policies have at least one waiting period before you can receive benefits. For example, there could be a 14 day period after an injury and a longer period after an illness.

Long-term disability policies usually have a waiting period of 90 days, but waiting periods are typically between 30-720 days. This waiting period is also called an “elimination period.” When you enroll, your disability insurance company may give you several options for different elimination periods 30, 60, 90, 120, 180, or 360 days. Typically, the longer you wait to receive benefits, the less expensive your premiums.

How Are Disability Plans Purchased?

Short-term and long-term disability plans can both be purchased from insurance companies. Many employers also offer disability policies as part of their benefit packages.

How Costly Are Disability Insurance Policies?

Long-term policies tend to be more expensive due to the potential length of benefit payouts. If you can only afford short-term or long-term disability, long-term is the right choice. A long-term disability policy can protect your income and wellbeing for decades.

In the event of a short-term illness or disability, you have other options. Worker’s compensation, Social Security and other protections may be available to make ends meet.


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