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Fall 2019  Volume 12, Number 3        

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What to Know: Long-term vs. Short-Term Disability Insurance

No one really expects to become disabled, but it does happen.

According to the Social Security Administration, three in 10 workers entering the workforce will become disabled and will be unable to work before they reach the age of retirement. The Council for Disability Awareness reports that approximately 90 percent of those disabilities will be caused by illness rather than accidents.

If you are in your prime wage earning years, short-term disability and/or long-term disability insurance can protect your income when you become sick or injured. You won't be able to totally match your salary (the premiums would be prohibitive) but usually you can come close. In addition, disability benefits usually are not taxed, so your benefits should be close to your take home pay.

And while some people think that workers' compensation or government benefits offer protection in case of disability, workers' compensation is limited to work-related injuries and it can be difficult to qualify for Social Security disability insurance (SSDI). It's one reason many experts rank long-term disability as one of the top "must have" insurance plans to purchase.


The question for many people is what's the best fit for their situation, short-term or long-term disability insurance. To make that decision, consider the following:

  • How long will each type of disability insurance last?
  • How long you will have to wait before benefits are paid (this is known as the elimination or waiting period).
  • How much coverage does each offer?
  • What is the cost difference between short- and long-term insurance?

These are the main differences between the two:

Short-term Disability

  • How long coverage lasts — Typically lasts between three to six months.
  • Elimination (waiting) period — Usually fewer than 14 days.
  • How much coverage — Provides about 80 percent income replacement.
  • Cost — Least expensive.

Long-term Disability

  • How long coverage lasts — You can apply for a benefit period that lasts two, five, or 10 years, or until retirement.
  • Elimination (waiting) period — Ranges from 30 days to two years, but the most common is 90 days (the longer the elimination period, the cheaper the policy).
  • How much coverage — Provides about 60 percent income replacement.
  • Cost — More expensive.

While it might be tempting to just go with the least expensive option, the Council for Disability Awareness says that the average individual disability claim lasts for less than three years. A short-term policy might not provide enough coverage. Many experts recommend purchasing short-term disability insurance as a supplement to long-term disability insurance since the short-term policy would provide benefits before the long-term policy kicks in. By doing this, you can increase the elimination period of your long-term policy and significantly lower your costs for that plan.


As mentioned, what you pay for coverage depends on a number of factors, including the benefit period, elimination period, and coverage amount. Additional factors include your age, health, occupation, location and any extra features you might want. Usually, it will cost you from one to three percent of your annual salary for a disability policy.

Another option is to get a subsidized short-term disability policy through your employer, which may be available to you free as part of your benefit package. Keep in mind that the policy will be tied to your employment, so if you leave your job, you will lose coverage or will have to pay a high cost to retain the policy.

If you have enough emergency savings for three to six months, you might not need short-term coverage.

When choosing a long-term disability insurance policy, look for a company with good ratings from places such as the Better Business Bureau and A.M. Best.


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In this issue:

This Just In...

Benefits of Hospital Indemnity Insurance

Important Changes to Medicare Part D

What to Know: Long-term vs. Short-Term Disability Insurance

Travel Insurance for Peace of Mind


The information presented and conclusions within are based upon our best judgment and analysis. It is not guaranteed information and does not necessarily reflect all available data. Web addresses are current at time of publication but subject to change. SmartsPro Marketing and The Insurance 411 do not engage in the solicitation, sale or management of securities or investments, nor does it make any recommendations on securities or investments. This material may not be quoted or reproduced in any form without publisher’s permission. All rights reserved. ©2019 The Insurance 411. www.theinsurance411.com Tel. 877-762-7877.