How Do You Know if Your Need Short or Long-Term Disability Insurance?

What is short term disability insurance?

Short term disability insurance provides income replacement should you become disabled on a short-term basis.

What qualifies for short term disability?

Many conditions may qualify you for short term disability. Commons causes for short term disability claims include:

  • Maternity
  • Muscle injuries
  • Back & knee pain
  • Mental health issues
  • Fractures
  • Digestive disorders
  • Hernias

Short term disability is often used in lieu of maternity leave if a company does not offer paid maternity leave. Maternity is a valid diagnosis for short term disability. You don’t need to wait until birth, your doctor can file a claim in preparation.

The disability benefits depend on how your doctor fills out the form. If it was a standard delivery with no complications, your doctor may note a shorter period of time than if the delivery was C-section or included complications that would call for more time away from work. In those cases your doctors may need to revisit your claim every couple weeks as part of the ongoing recovery.

Short term disability is a totally different type of coverage than workers’ compensation insurance. If an accident or injury happened at work or in the line of work, it would be a worker’s comp claim, not a disability claim.

How much does short term disability insurance cost?

Short term policies allow employers to designate a percentage of an employee’s pre-disability pay to be paid out as short term disability benefits while they’re unable to perform their job. The standard percentage is usually 60% to 66.66% of their usual pay.

You could also designate a dollar amount limit per week based on their pay rate prior to disability. How much you designate as the percentage of pay, up to a specified dollar limit, will affect the price of your plan.

How long do short term disability benefits last?

In this case, short term usually means up to 26 weeks or 6 months. Typically these short term disability policies will have a waiting period before claim benefits come into effect. The waiting period is different based on whether the short term disability is due to injury or due to illness. A one day waiting period is typical for an injury, and 7 days is typical for illness, but can be longer, up to 60 days.

How much income does short term disability insurance replace?

The standard percentage is usually 60% to 66.66% of their usual pay, but it does vary. Short term disability always takes into account other sources of pay and reduces the benefit accordingly. For instance, if you have sick time paid at 100%, you won’t get short term benefits for the same days you’re using sick days.

Short term disability also can not be paid out at the same time as a long term disability policy. You don’t have to provide both, but if you do have both, the short term policy length is the waiting period for the long term policy. So if your short term policy lasts 26 weeks, 26 weeks is the waiting period for the long term policy to take effect.

What is long term disability insurance?

Long term disability is designed to replace income due to inability to work for longer than 26 weeks. It does not come into effect until after a short term policy has run its course, if you have both policies. Without a short term policy, there is still a waiting period before long term policy claims are paid.

What qualifies for long term disability?

Just like short term disability, long term disability is not the same as workers’ compensation insurance. If an accident or injury happened at work or in the line of work, it would be a worker’s comp claim, not a disability claim.

Many conditions may qualify you for long term disability. Commons causes for long term disability claims include:

  • Musculoskeletal disorders
  • Cancer
  • Pregnancy complications
  • Mental health issues
  • Fractures

How much does long term disability insurance cost?

Similar to short term disability, the total costs to the employer or to the owner of an individual policy vary. Costs are based on the number of employees, the county of residence and ages of the employees, pre-disability income, what percentage of that income the policy will pay out, and the claims limit.

How long do long term disability benefits last?

Usually, long term disability claims & benefits are revisited after two years, but can last up to the normal social security age. By then, the idea is that you will have either recovered, found a different job that you can perform, or have switched over to Social Security disability payments.

How much income does long term disability insurance replace?

This is also determined by the employer, or whoever is taking out the policy, in the same manner as short term policies are determined. It is based on a percentage of your pay rate, up to a specified dollar amount limit per month, as opposed to per week for a short term disability policy.

Shopping for & buying an individual disability policy

It is not very common for individuals to purchase short term disability policies. It’s more common we see long term policies for individuals, but even then, it’s much more common to have employers take out policies rather than individuals.

What are benefits on individual disability insurance over employer-sponsored?

Under an individual policy, you can keep a higher level of privacy on your personal health and specific details on your injuries, illnesses, and claims. Under an employer’s policy, during claims processing, you could expect at least one person in the company to see your health details in your claim. Even though employers must be discreet and keep this information private and secure, with an individual policy, you’d know that no one at your workplace would be processing your claims and see private health information.

Individual policies are also portable, meaning you can change jobs and the policy stays with you. Few employers offer portable policies, and it is very rare to see one that does.

Individual policies give you more options to customize your plan. If your plan is offered through an employer, you don’t get the opportunity to customize the plan individually.

One downside is that individual policies are more expensive than group policies. Also, employers can pay for disability policies pre-tax, but individuals don’t have the option to pay for the policy pre-tax.

Shopping for & buying a company disability policy

What are the benefits of having an employer-sponsored disability insurance policy?

Group disability plans can allow for waiver of premium. If you become disabled and your claim is approved, you no longer have to pay for your employee portion of premium for the duration of your disability, as long as you’re receiving benefits.

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