The distinction between long-term and short-term disability insurance

Most of us head to work each day with disability or injury being the last thing on our minds. While there is no need to obsess over the prospect of being unable to work, there is no harm in being prepared.

Disabling conditions or injuries can affect anyone. Certain afflictions may only keep you out of action for a few weeks, while others can be chronic, forcing you to retire or take extended time off. Disability insurance is one form of assistance that can help you if you’re unable to work. This can come in the form of Long-Term Disability (LTD) and Short-Term Disability (STD) insurance.

What’s the difference?

The length of coverage

While STD insurance generally covers you for a brief period, usually between 3-6 months, in rare cases, coverage can go on for longer. LTD insurance, on the other hand, is designed to provide coverage for several years or more. Depending on the policy, LTD insurance might even continue into your retirement.

How much you are paid

There are some variations between policies, but STD insurance typically covers a larger proportion of your total income. Payments tend to be in the region of 70% of your income amount. The counterbalance to this is that the coverage will only be offered for a short time.

LTD insurance, on the other hand, generally covers between 40-70% of your income, but for a longer period of time. The downside of this is that you may have to wait longer before receiving your payments. This waiting period is commonly referred to as an “elimination period”, and it can delay payments for 3-6 months and even years in extreme circumstances. This should be taken into consideration when thinking about the type of coverage you need. Could you hold out and cover expenses during the eliminations period?

You may be unable to work through no fault of your own, and you are entitled to help in this situation. As you think about your options, make sure you are aware of your legal rights.