Whether you’re a new employee or a lifer, annual enrollment for benefits at your company often presents a wide array of options to consider. Short-term and long-term disability insurance are common offerings that can help provide some financial protection if you’re unable to work due to a covered injury or illness. If you’re debating whether to elect either or both coverages, here’s a primer on what they do and why they may be an important addition to your benefits package.
Why disability insurance?
Nobody expects to become disabled, but the reality is that an accident or illness can happen to anyone at any time. And when they do, you could be away from work for weeks, months or even longer. While your job may be protected for a certain time under the federal Family and Medical Leave Act (FMLA) and any applicable state leaves, your company may no longer pay you after you’ve used any accumulated sick time. That’s where short-term and long-term disability insurance can help.
Disability insurance replaces a portion of your income if a covered illness, injury or other condition—including pregnancy and childbirth—prevents you from working.
Disability insurance replaces a portion of your income if a covered illness, injury or other condition—like pregnancy and childbirth—prevents you from working. That income can help you and your family continue to pay for health care, child care, household expenses, etc., while you’re away from your job. It’s insurance coverage that kicks in when you need it most.
It’s important to note that disability insurance only replaces a portion of your existing income. Coverage may be subject to exclusions and limitations, including a preexisting conditions exclusion, and you will likely have to wait a specific amount of time after the start of your leave—known as the “elimination period”—before disability payments begin. But it’s also much more than just partial income replacement. Most plans include work incentives and other services and benefits designed to encourage a return to work and wellness.
Disability insurance is typically offered as separate short-term and long-term options. While the differences may seem obvious, there are important distinctions.
What is short-term disability insurance?
As its name implies, short-term disability insurance provides coverage for shorter medical leaves—typically three to six months. Short-term disabilities are more common than you may think. Pregnancy, digestive disorders and broken collarbones are just a few conditions that may qualify for claims. If you qualify for short-term disability benefits, you will continue to receive benefits while you remain disabled until you’re able to return to work or until you reach the end of your maximum benefit duration.
Short-term disability insurance payments are typically paid on a weekly basis and the elimination period is typically shorter, as the goal is to provide temporary income while you recover and until you eventually return to work.
What is long-term disability insurance?
Long-term disability insurance is designed to provide supplemental income when disabling injuries or illnesses such as cancer prevent you from working for an extended period of time. Because of these longer durations, long-term disability payments are typically paid on a monthly basis, and the elimination period is longer.
While on a long-term disability leave, your insurance provider will often work with your employer to help facilitate a gradual return to work when possible—or may assist in finding accommodations that allow you to work in a different capacity. The coverage usually includes return-to-work incentives, temporary recovery periods without having to restart the elimination period, vocational rehabilitation analysis and expertise, assistance and support if you need to file for Social Security benefits, and other benefits and incentives designed to support you during your period of disability and help you return to your maximum level of health and productivity.
Depending on the coverage and the severity of the condition, long-term disability claims may last up to a certain number of years or until you reach retirement age.
Choosing the right coverage for you
The decision to choose short-term or long-term insurance—or both—is ultimately up to you and your protection needs. However, they are designed to work together, as a short-term claim is typically filed first to provide more immediate relief, with a long-term claim filed later if necessary.
If you have questions about your specific coverage options, your company’s benefits team and enrollment materials can help you make the best decision for you and your family.
