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Short-term vs. long-term disability insurance
Disability insurance offers coverage for two different lengths, but having both gives you the greatest coverage.
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Short-term and long-term disability both provide you with income if you’re out of work due to a covered disability, but differ based on the amount of income they’ll replace and the length of time they’ll pay out. Having both provides the most protection against losing your ability to bring in money after a disability.
What's in this guide?
Short-term vs. long-term disability insurance
| Short term | Long term | |
|---|---|---|
| Average cost | 1% to 3% of your income | 1% to 3% of your income |
| Coverage amount | 60% to 80% of your income | 40% to 60% of your income |
| Elimination period | 1 to 90 days | 30 to 730 days |
| Benefit period | 1 to 12 months | 24 months up to retirement age |
How does short-term disability work?
Short-term disability insurance normally replaces 60% to 80% of your pre-disability income, but only pays your disability benefit for one to 12 months, depending on which plan you select.
What should I know about short-term disability insurance?
- Replaces more of your income than long-term disability
- Gives you access to cash quickly after becoming disabled
- Might be offered through your employer
- Normally less expensive than long-term disability
How does long-term disability insurance work?
Long-term disability has a lower benefit amount than short term disability, paying out 40% to 60% of your predisability income. But the benefit period lasts much longer. Choose a benefit period of two, five or 10 years, or even up to retirement age.
What should I know about long-term disability insurance?
- Covers more types of disabilities than short-term disability
- Benefits pay out for a longer period of time than short-term disability
- Typically not much more expensive than short-term disability
- Pays out roughly half of your predisability income
Pros and cons of short- and long-term disability
Pros
Short-term disability
- Provides immediate cash
- Covers more of your income than long-term disability
- May be offered through your employer
- Normally a lower price than long-term disability
Long-term disability
- Covers a wider range of disabilities than short-term disability
- Pays a benefit for a long period of time than short-term disability
- Could pay over half your predisability income
Cons
Short-term disability
- Coverage typically lasts less than one year
- More narrow range of disabilities covered than long-term disability
- Costs about the same as long-term disability, but you’ll be covered for a shorter period of time
Long-term disability
- Pays a smaller percentage of your income than short-term disability
- Extended waiting period before you can collect a payout
- May not be offered through your employer
Which insurance should I buy?
| Type of Insurance | Consider buying if… |
|---|---|
| Short-term disability | You don’t have any other source of money to get you through a few months without a paycheck. |
| Long-term disability | You want coverage for peace of mind if a disability lasts longer than one year. |
Can I buy short-term disability and long-term disability?
Yes, you can buy both short-term and long-term disability. In fact, having both types of disability policies provides you with the greatest amount of coverage if you suffer a disability. Short-term disability provides you with immediate cash that’s up to 80% of your income, while long-term disability provides money after you complete your waiting period — typically 90 days.
Most insurers offer both short and long-term disability plans, so you could buy both policies from the same company. Doing so would likely give you the most streamlined claims process, though it may be cheaper to buy from different companies. And if you have one plan through your employer, you’ll probably need to buy the other plan through a different company.
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Bottom line
Having both short- and long-term disability plans gives you the most complete coverage in case you have to miss work because of a temporary or permanent disability. Both policies cover you for separate time periods, though long-term disability pays out a benefit for a longer period of time.
Before settling on a policy, be sure to compare disability insurance companies to find the best one for you.
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