Long vs. Short-Term Disability Insurance Differences

Every year during your benefits enrollment, you’ve probably encountered options for long- or short-term disability insurance and wondered, “Do I really need this? What is the difference?” In short, the key differences between the two types of disability insurance policies are benefit periods and elimination periods. Your options will vary by insurance carrier and employer, so it’s important to understand your options and how they work.

If you’re not familiar with what these options are and how you could benefit from them, you may feel stressed during your enrollment as you quickly try to review the policies. Knowing what long- and short-term disability insurance is now can help you make the best decision for your family later.

The Basics of Disability Insurance

Before we dive into the differences between long- and short-term disability insurance, it’s important to understand what disability insurance is and some common terms used when discussing it.

Disability insurance is designed to help protect your income and your family in case you are ever unable to work because of a covered injury or illness. When you use disability insurance, you receive a portion of your gross monthly. Depending on your provider, the money may be deposited directly into your account, providing you with the freedom to pay your living expenses and make other purchases as you see fit.

As you consider how much disability insurance you need, you should consider the amount needed to pay for your financial obligations if you were to lose your income due to a covered disability. The maximum amount a policy will pay varies depending on your policy.

Differences Between Long- and Short-Term Disability Insurance

The function of long- and short-term disability insurance is the same: to provide benefits in case of lost income due to a qualifying disability. However, there are two things that may vary between these two options: when the benefits will begin and how long they will last.

Length of Benefits

The key difference between long- and short-term disability insurance is typically the length of benefits your policy will provide. According to the Council for Disability Awareness, the duration of the average long-term disability claim is 34.6 months.¹

While benefit periods may vary, a short-term disability insurance policy is likely to pay benefits for less than one year. For long-term disability insurance policies, depending on your policy and provider, these may last for two, five, or 10 years, or until retirement age.

Elimination Periods

When you choose a disability insurance policy, it will typically have options for the elimination period. An elimination period is the time between the date when you were unable to work and the date you will begin to receive benefits.

For example, if you have an elimination period of 30 days, you will wait 30 days after you were unable to work before you begin receiving benefits from your policy.

For both long- and short-term disability insurance policies, you will likely have the option to pay a higher premium for a shorter elimination period. Depending on your policy and provider, the options for your elimination period may vary depending on if you have long- or short-term disability insurance. Short-term policies often may have the option for a shorter elimination period than long-term policies.

This blog is up to date as of May 2020 and has not been updated for changes in the law, administration or current events.