Short-term and long-term disability insurance have many similarities but a few key differences in how they protect your income.
(Stu’s Views and MS News)
Disability insurance is a must-have part of your financial safety net, as important as life insurance or an emergency fund. Even though it protects your income when you’re unable to work due to illness or injury, some people would rather rely on workers’ compensation or government benefits programs for protection. But the truth is that workers’ compensation is limited to work-related injuries and Social Security disability insurance (SSDI) is hard to qualify for. In the end, it comes down to long-term disability vs short-term disability for income protection.
For many people, long-term disability insurance is a better option, because it lasts longer and is more cost-effective than short-term insurance. Short-term disability insurance can provide complementary coverage but won’t be enough for most people on its own. To understand the differences between short- and long-term disability insurance, you need to know:
- How long each type of disability insurance lasts
- When each type of disability insurance starts
- How much coverage long-term and short-term disability insurance offer
- The cost difference between short- and long-term insurance
- Where to buy disability insurance
How long do short-term and long-term disability benefits last?
The amount of time someone can receive disability benefits is called the benefit period, and a natural place to start comparing short- and long-term disability policies is how long they last. Going by their names it’s obvious that one lasts longer than the other, but what exactly do “short-term” and “long-term” mean?
Short-term disability benefits typically last between three to six months. Long-term benefits are measured in years; you can apply for a benefit period that lasts two, five, or 10 years, or until retirement age.
Broadly speaking, the shorter the benefit period, the cheaper the disability policy. But keep in mind that the average disability lasts around three years; one of the problems with short-term disability insurance is that the coverage isn’t adequate for most people. At best, short-term disability insurance should supplement long-term disability insurance, the former providing income protection until the latter kicks in.
When do disability benefits start?
““““““““““““““““““““““““““`
Visit our MS Learning Channel on YouTube: http://www.youtube.com/msviewsandnews