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What Is the Difference Between Short Term and Long Term Disability?

Disability insurance form with glasses and ballpoint pen.

Do you wonder what happens if you get injured or sick and can’t work for a long period of time?

Everyone can suffer from an unforeseen circumstance, such as an illness or accident that requires temporary interruption of work activity. This can be a serious financial problem for those who have not taken out a good long-term disability insurance policy.

The main advantage is the possibility of receiving an amount of money for each day of absence from work due to medical leave. With these insurance policies, employees don’t need to worry about being on leave from a company without pay when they are ill or injured.

However, both employers and employees know about short-term vs. long-term disability insurance. It could make a big difference to them in the future.

So, are you trying to figure out disability insurance? Read this article to learn about the difference between short term disability and long disability.

Short-Term vs Long-Term Disability Coverage

Offering short-term or long-term disability coverage means a significant change in employee benefits.

Employees are protected when they are off the job and their coverage will pay them a percentage of their regular wages. Often, taxes are withheld from an employee’s disability payments.

The main distinction between short-term and long-term disability insurance is the length of time (and percentage of income) a person has coverage.

However, you should also distinguish between disability insurance and worker’s compensation insurance. In the second case, the employee is injured at their work.

People often get confused between short and long term disability insurance, not knowing which one to choose. Read on to learn more.

Short-term disability coverage

Generally, workers worry about two types of insurance: health and retirement. But they usually forget about disability insurance. Sometimes, they are not even aware that they can access this type of insurance.

Short-term disability (STD) is an immediate remedy to the financial problems arising after a disability.

This insurance pays you a portion of your income for a short period of time after you run out of sick leave (typically lasting less than 1 year).

However, it should be noted that employees must choose to receive this kind of disability insurance before they become incapable of work.

Employees can receive up to 60% of their regular wages.

How Long Does It Last?

The length of the coverage lasts for between 9 and 52 weeks, although it depends on the kind of policy the employee has. STD coverage does not usually cover work-related injuries.

The insurance begins to take effect between 1-14 days after the employee becomes incapable of working. Nevertheless, employees can use long-term disability insurance when their injury or illness extends beyond the time frame of their short-term disability coverage.

Who Qualifies For It?

Employees with short-term disability insurance are eligible to use their coverage when they suffer from a sickness or severe injury for a lengthy period of time.

Employers may well require records from the employee’s general practitioner(s) that verify their situation.

Additionally, employees are likely to need to work for an employer for a precise amount of time before they can make use of their disability insurance.

What Does It Cover?

Some common life events that are usually covered by short-term disability are:

  • Prolonged sickness
  • Back problems
  • The birth of a child
  • Arthritis
  • A disabling injury
  • Injuries from an accident

Short-term disability insurance policies, however, can have a few tradeoffs. They usually have fewer options and protections for payouts under certain circumstances. In addition, benefits run out within a few months.

Despite these drawbacks, short term disability insurance can be the best option for you if you are keen on lower monthly payments in exchange for a shorter term of benefit payments.

Long-Term Disability Insurance

Long-term disability insurance (LTD) begins once your STD benefits and employer-granted sick leave has been used up.

It pays 50-70% of an employee’s salary when the employee can’t work due to an injury or illness.

For that, the main benefit of long term disability insurance is the peace of mind that comes with knowing that benefits of up to 70% will continue as long as the sickness or disability lasts.

In addition to that, these kinds of policies normally allow for more options, like adding supplemental insurance or hospital coverage. There is also a difference between tax-qualified and non-tax-qualified.

If you think long term disability coverage is a good option for you, then it might be an idea to find a lawyer to take you through the process.

How Long Does It Last?

The duration of coverage depends on the employee’s policy. An employee can receive long-term disability coverage for a range of time periods. For example:

  • Up to the age of 65
  • For 5-10 years
  • Or, for as long as they are disabled

LTD typically lasts more than 6 months.

The long-term coverage begins between 10-53 weeks after the employee is first incapable of working. During this time they should be covered by their short-term disability.

Who Qualifies For It

If an employee has LTD insurance, they are eligible to receive coverage when they are unable to work.

What Does It Cover?

The following are examples of illnesses and injuries that might prevent an employee from working. They are usually covered by LTD:

  • Musculoskeletal/connective tissue disorders (back pain, osteoarthritis)
  • Cancer
  • Accidental Injuries
  • Cardiovascular/circulatory disorders (heart attack, coronary artery disease)
  • Mental Health Problems
  • Injuries from an accident
  • Nervous system disorders

Employees should know that pre-existing conditions (meaning illnesses or injuries that were found before long-term disability coverage began) are normally not covered.

However, if you have doubts about this kind of insurance, it is always useful to find a  lawyer to advise you.

So, Long-Term or Short-Term?

Hopefully, now you have worked out the difference between a short term disability and a long term disability, as well as the types of insurance available for each.

If you are an employee or an employer, it is good to remember as well that having disability insurance in your workplace can really improve the working environment.

For example, it’s a way for employers to express their respect, consideration, and appreciation for the people they employ. But there are more benefits as well.

The important thing is not to wait for a disability to happen before you have the insurance. So why not look into disability insurance today?.

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