Short-Term vs. Long-Term Disability Insurance

Short-term and long-term are the two types of disability insurance coverage. Short-term disability coverage pays benefits for a few weeks to a year, while long-term coverage pays benefits for several years or until retirement.

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  • Written By
    Jennifer Schell, CAS®

    Jennifer Schell, CAS®

    Financial Writer, Certified Annuity Specialist®

    Jennifer Schell is a professional writer focused on demystifying annuities and other financial topics including banking, financial advising and insurance. She is proud to be a member of the National Association for Fixed Annuities (NAFA) as well as the National Association of Insurance and Financial Advisors (NAIFA).

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  • Edited By
    Savannah Pittle
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    Savannah Pittle

    Senior Financial Editor

    Savannah Pittle is an accomplished writer, editor and content marketer. She joined as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

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  • Financially Reviewed By
    Daniel J. Adams, MBA, CFP®, CLU®
    Daniel J Adams, reviewer

    Daniel J. Adams, MBA, CFP®, CLU®

    Founder and President of CEG Life Insurance Services

    As the founder of CEG Life Insurance Services, Daniel J. Adams has extensive experience with life and health insurance products. Daniel assists clients in building a secure financial future as a Certified Financial Planner™ professional and independent insurance agent. He also trains new agents and advises other financial professionals.

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  • Updated: August 14, 2023
  • 5 min read time
  • This page features 4 Cited Research Articles

Key Takeaways

  • The two types of disability insurance are short-term and long-term.
  • A short-term policy typically pays up to 80% of lost income for temporary disabilities that resolve in a year, such as surgery recovery or pregnancy.
  • Long-term disability insurance typically covers up to 60% of lost income, and the benefits can last for years or until the disabled person retires.

Disability insurance replaces a portion of lost income if you cannot work due to an illness or injury. The two types of disability insurance, short-term and long-term, supply benefits for different lengths of time. Other differences include when the benefits begin, how much of your income is covered and what conditions qualify for benefits.

Comparing Qualifying Conditions

To qualify for short-term or long-term disability insurance, you must prove that you are unable to work because of an illness or injury. You’ll have to work with your doctor to provide medical records showing how your disability affects your ability to work.

A short-term disability insurance pays benefits for conditions that are expected to resolve within a year. Common medical conditions that qualify for short-term benefits include recovering from surgery or injuries sustained in an accident, like a broken bone. Many pregnant people use short-term disability coverage to recover after childbirth.

In contrast, long-term disability benefits are paid for illnesses and injuries that might be permanent or take years to resolve. Cancer treatment, chronic pain and other debilitating illnesses may qualify someone to receive long-term disability benefits.

Both short-term and long-term disability insurance can be an important part of a comprehensive income protection plan. It is important to understand how both products work together to provide financial security in the event of a disabling injury or illness.

Comparing Costs

The cost of disability insurance usually amounts to between 1% and 3% of your annual income. Disability insurance pays benefits proportional to your income, so the more money you make, the more expensive your premiums will be.

Because a claim on a long-term disability policy can pay benefits for decades, long-term disability insurance tends to be a bit more expensive than short-term coverage. “The premium for a long-term policy will depend on several factors, such as the amount and duration of benefits you choose, your age, occupation and health history,” said Linda Chavez, founder and CEO of Seniors Life Insurance Finder.

The premiums for short-term disability coverage factor in many of these same features. Regardless of what type of policy you purchase, the younger and healthier you are, the less you’ll pay in disability insurance premiums.

Comparing Benefit Periods

The benefit period is the biggest contrast between short-term and long-term disability insurance. As their names might suggest, short-term disability policies are designed to provide benefits for a shorter period of time, while long-term disability policies offer a much longer benefit period.

Short-term disability benefits can last from a few weeks to a full year. The benefit period for most short-term policies is between three and six months.

For long-term disability insurance, benefits can continue for multiple years. Many policies pay benefits for three years, and some cover up to 10 years. You can even purchase a policy that continues paying benefits until you reach retirement age if you become permanently disabled and can never work again.

Comparing Coverage Levels

Short-term and long-term disability insurance replace a portion of the income lost due to a disability. Disability benefits are usually calculated as a set percentage of your monthly wages. When purchasing a policy, you may be able to choose how much of your income is covered, but a policy that covers a higher percentage will have more expensive premiums.

In general, short-term disability benefits replace a greater percentage of income than long-term benefits. This is because long-term policies pay benefits for much longer, sometimes 10 years or more.

With a short-term disability policy, you’ll receive between 40% and 70% of your monthly income in benefits, and some policies pay up to 80%. Long-term disability policies, on the other hand, will usually replace anywhere from 40% to 60% of wages.

Comparing Elimination Periods

The elimination period of a disability insurance policy refers to how long the insured person must be disabled and unable to work before they can receive the benefits of their policy.

Because short-term policies only pay benefits for a few weeks to a year, the elimination period of these plans tends to be relatively short. For most short-term disability plans, the elimination period is two weeks. Some insurers might offer a range of elimination periods from one week to a month.

Long-term disability coverage commonly has an elimination period of 90 days. You will likely have a choice of how long you want your elimination period to be when you purchase a long-term disability insurance policy. Other common elimination periods for long-term disability coverage are 30 days, 60 days or 180 days.

The length of your policy’s elimination period affects how much you’ll pay in premiums. You can choose a longer elimination period to reduce your monthly premium cost or select a policy with a shorter elimination period so you can access your benefits sooner.

Comparing Short-Term and Long-Term Disability Insurance

Short-Term Both Long-Term
Covers conditions like surgery recovery, pregnancy

Benefits last between a few weeks and a year

Replaces up to 80% of income

Elimination period between a week and a month

Replace some of income lost due to a disability

Premiums cost between 1% and 3% of annual income

Covers conditions like cancer, chronic pain

Benefits last multiple years, sometimes up to retirement

Replaces up to 60% of income

Elimination period between 30 and 180 days

Do You Need Both Short and Long-Term Disability Insurance?

Whether you need both short and long-term disability insurance depends on your personal financial situation. Consider how your financial circumstances would be impacted if you couldn’t work for a month. What about three months? Six months?

“While the need for short-term disability may be eliminated by an adequate emergency fund, long-term disability is significantly harder to self-insure and, therefore, long term disability insurance is a viable option for a larger portion of the US population.”

For many Americans, even a month or two of lost work can jeopardize their financial stability. In this case, you may consider investing in both a short-term and long-term disability plan to safeguard your income if you become sick or injured, even temporarily.

On the other hand, those with a robust emergency fund might find that having short-term disability coverage is not necessary. If you’ve saved up enough to cover six months of expenses, as many financial experts recommend, you could forgo short-term disability insurance and rely on your savings to supplement your income if you’re out of work for a short period of time.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: August 14, 2023