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When you need to file a claim under a disability insurance policy, or you’re trying to determine what kind of disability insurance coverage you need, it is important to understand the distinction between short-term disability insurance and long-term disability insurance. The policies are quite different in several key ways. Questions about when you qualify for benefits and how much you are eligible to receive will vary depending on the terms of your policy.

While every disability insurance policy is unique, there are some basic differences between short-term and long-term disability coverage. An attorney who works with disability insurance claims can review your policies to assess the coverage offered in your particular situation, but here are some general distinctions between short-term and long-term disability insurance.

The Purpose Can Differ

Nominally, short-term disability coverage is designed to provide income protection from a condition that only lasts a brief time and from which you are expected to recover relatively quickly, while long-term disability insurance is intended to replace income lost when you are unable to work due to a condition that lasts an extended period and from which you may never fully recover. As a practical matter, however, no one can predict recovery, and a condition that makes you eligible for short-term disability benefits could also be one that qualifies you for long-term disability insurance benefits as well. 

For instance, short-term disability insurance is often used to provide income while recovering from a surgical procedure with the expectation that the policyholder will return to regular work duties when recovery is complete. However, surgery is not always successful at resolving a medical problem, and in some cases, complications from surgery can leave an individual struggling to cope with a different illness or injury, extending the disability period considerably.

Duration of Coverage

As the names imply, one of the primary differences between short-term and long-term disability insurance is the duration of time covered under the policies. Short-term disability coverage typically lasts no more than six months, and the duration of coverage is often much shorter, so claimants may only receive benefits for as little as four to six weeks. The policy will no longer pay benefits once the benefit period has been exhausted, even if the disability is worse than before.

Long-term disability benefits generally continue for a period of years rather than months. Some policies will provide benefits for five or ten years, while others may promise coverage that lasts until retirement age. There is no standard formula for the duration of coverage for either short-term or long-term disability benefits, so it is vital to read through the policy details to understand how long benefits are supposed to last with each type of policy. Insurance companies have also been known to wrongfully terminate benefits even when a disability remains, and policy terms specify that coverage should continue. An attorney can work internally to get benefits reinstated or file a legal claim for reinstatement if necessary.

Elimination Period

Neither short-term nor long-term disability insurance policies will pay benefits the moment you become unable to work due to an illness or injury. Instead, both types of policies impose a waiting period, and this also will vary according to the type of insurance coverage and the details of the specific policy. This waiting period is often referred to as the elimination period. Generally, the elimination period is fairly brief for short-term disability coverage. You may be able to start receiving benefits within a week or two after you stop working.

By contrast, you may need to wait several months before you are eligible to receive benefits through a long-term disability policy. In a perfect world, the elimination period for long-term benefits would end at the time that short-term disability coverage stops so coverage would be continuous. However, claimants often need to deal with a gap between the time that short-term coverage ends and long-term coverage begins. This gap is extended if the insurance company denies the claim for long-term disability benefits.

Benefit Amount

Both short-term and long-term disability insurance are forms of income replacement. They are designed to compensate for some of the income you’re missing due to your inability to work. The benefits are usually based on a percentage of your income rather than a set amount. When signing up for a policy, it is often possible to choose the level of income replacement the policy will provide—obviously, a higher benefit percentage will require you to pay a higher premium.

As a general rule, short-term disability insurance policies tend to pay higher percentages than long-term disability insurance policies, but that can vary. Short-term disability policies frequently pay between 60-70% of income earned before onset of the disability while long-term disability policies often pay between 40-60% of pre-disability income.

Even though short-term disability policies pay a higher percentage of your income, because the benefits are paid for an abbreviated period of time, the cost of these policies is often considerably lower than the cost of long-term disability insurance.

Do You Need Both Types of Coverage?

Many people associate disability with the aging process and believe that they don’t need to give serious consideration to disability insurance until they get “older.” But the conditions that lead people to file disability claims, such as cancer and mental illness, can strike at any stage of life and lead to both short and long-term needs.

If you have enough money in savings to cover your expenses if you were to be out of work for at least six months—and you’re ready to give up that nest egg—then you may be able to forgo short-term disability insurance. Most people do not have the resources to stay out of work for years; so, long-term disability insurance can provide a valuable lifeline. Short-term and long-term policies often combine well to form comprehensive protection, although the shift from short-term to long-term coverage essentially involves filing a new claim and starting the process from scratch.

Examples of Short-Term and Long-Term Disability Coverage

One way to understand the differences between short-term and long-term disability insurance is to consider some of the ways these policies are typically used by comparing hypothetical examples:

• Sami is a dentist who gives birth to her first child through cesarean section. After two weeks off from work, her short-term disability insurance pays her 65% of her regular income for eight weeks while she is recovering.
• Luka is the CFO of a transportation company who suffers multiple broken bones in a car accident. One week after the accident, his short-term disability insurance pays 70% of his regular salary for three months until he is able to return to work.
• Danielle is a surgeon who develops peripheral neuropathy. Although she is able to manage the condition for a while, eventually, the pain prevents her from performing surgery. She works part-time in a telemedicine position, but her salary is far less than what she earned as a surgeon. Six months after she stops working as a surgeon, she begins receiving long-term disability benefits that pay 40% of her previous salary and these benefits are set to continue until she reaches retirement age.
• Ryan is an estate planning attorney who developed prostate cancer. Two weeks after he stops working to undergo surgery, he begins receiving short-term disability benefits that pay 70% of what he typically earns. He begins chemotherapy and radiation treatments that make him too ill to work. His short-term disability benefits end, but he is able to receive long-term disability benefits that pay 55% of his regular earnings for two years until he is able to work again.

Help with Short-Term and Long-Term Disability Claims

In addition to knowing when you become eligible for benefits and how long those benefits may last, it is vitally important to understand the types of conditions that qualify you to receive short-term and long-term disability benefits. Insurance companies often deny claims or discontinue benefits, alleging that claimants do not suffer from a qualifying disability. When that happens, a disability insurance attorney can remind insurers about their legal obligations under the policy and get them to pay benefits.

At Seltzer & Associates, our experienced legal team includes insurance industry professionals, so we understand the persuasive arguments needed to get a prompt response from insurance companies. We also know how to succeed in court when insurers refuse to behave responsibly. If you have questions or need assistance with a disability insurance claim anywhere around the country, call us at 888-699-4222 or contact our team online for a confidential, complimentary consultation.