Short and Long Term Disability Insurance
Over the years I have sent out thousands of quotes regarding disability insurance for individuals. Many times over, once a client reviewed the quote, the question I have been asked is, “is this short term coverage”. The answer in my case is always no. I specialize in long term disability protection. This article is a quick description of short and long term disability insurance and some of the differences.
Short Term Disability Insurance
In “short”, short term disability insurance is income protection for in an injury or illness that covers 1 week to 180 days. This insurance is not usually available to an individual but primarily through a group disability program. The companies that provide short term disability insurance typically offer it through their benefits program for employees. The main reason for short term coverage is to protect the individual for an injury or illness that is going to prevent them from working for a short period of time. The coverage typically pays out a weekly benefit in the range of 60% of weekly earnings or in some cases a guaranteed amount. In some cases there is a “waiting period” before your benefits can begin. I have seen plans have zero days for current employees as well as 30 days for new employees. It depends on the plan design. Once you have satisfied this elimination period, your benefits would begin. The benefits would continue to a specific time, this is your benefit period. Most short term plans end after 90-180 Days. Short term policies are for those individuals whom find themselves unable to work for a short period of time. This can be a broken bone, a minor surgery, to treatment for cancer. Short term disability also protects one of the most asked questions in my personal experience, PREGNANCIES. I could not begin to tell you how many times I have been asked for disability insurance regarding pregnancies. Short term disability insurance is what you are looking for. Disabilities due to pregnancy are “usually” protected under short term plans. This may include C-sections, bed rest, etc. There are some policies that can exclude pregnancies, and you have to make sure you read the language in your short term plan. However, when women are looking for benefits regarding pregnancies, short term disability is what you need to look at.
So what happens if an injury or illness is severe enough to keep you out of work for months, even years?
Long Term Disability Insurance
You have been diagnosed with an illness. You have an injury severe enough to keep you out of work for 6 months to a year or longer. How are you going to pay your bills? How are you going to maintain your current lifestyle? Do you have enough in savings to survive the next year or so without an income? Most Americans do not have the savings to survive 6 months, let alone a year or so. This is where a long term disability insurance policy comes into the picture. Long term disability insurance (LTD) can be purchased or obtained through group or individual plans. I am not going to get into the specifics about the pros and cons of these options; I have addressed this in the past in a previous article (link to article). I am going to talk about the basics. LTD insurance is designed to protect the individual’s income from long term issues. This can be an illness or an injury. Most plans require an Elimination period with ranges from 30-720 days. Most plans I have sold have a benefit period to age 65 or longer. The monthly benefit is typically 60% of salary/income for group plans. For an individual plan your benefit amount is close to 60% of your income when you purchased the policy. It does not go up as your income grows. There are riders available that would allow you to increase moving forward, but if your policy was never increased it would be what you applied for. These policies pay a monthly benefit to offset a loss of income. These plans are designed for those that have permanent/severe condition that prevents the individual from working. All manner of illnesses could come into play, A-Z, from abscesses to zoster. There are many options to choose from regarding LTD. Some companies offer a group plan. For those that do not have a group LTD plan, there are many options for individual coverage. Unlike short term disability, individuals are frequently purchasing individual LTD. There are many options/carriers that offer individual plans. Most individual LTD plans offer comprehensive coverage and riders. Riders are additions to policies, which usually come at an increase in cost, which can offer partial disability coverage, future increase options and even additional benefits for extreme disabilities. Again, to go back to a frequently asked question regarding pregnancies, long term plans protect against disabilities caused by complicated pregnancies that last longer than 3 months or the elimination period, if longer. These disabilities due to pregnancy are covered on long term plans as long as your policy does not have “exclusion for pregnancy” due to a pre-existing condition.
There you have it, a simple breakdown of two very important types of income protection. Short term may not be available to you; however most people can purchase long term disability insurance. In most cases there is some form of underwriting involved. Make sure you check your benefits booklet and see if both types are available to you. If not you should really consider your options and reach out to an agent to get information about disability insurance.
The views and opinions expressed here are that of the author and do not necessarily represent the views and opinions of The Guardian Life Insurance Company of America, its subsidiaries or affiliates.
2015-2381 Exp: 2/2017