When shopping for disability insurance, pay attention to whether the
policy you are considering offers long-term or short term disability
benefits, and buy the policy that best suits your needs.
How do long term and short term disability policies differ?
Long term and short term disability policies, by definition, have different
purposes. Short term disability insurance is designed to pay you benefits
sooner and for a shorter period of time than long term disability insurance.
Here are the two major differences between these policy types :
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They offer different elimination
periods
Under the terms of your disability insurance policy, you'll have
to wait for a certain period of time after you become disabled before
you can begin receiving benefits. This waiting period is known as
the elimination period. Some policies (typically short term policies)
even offer two elimination periods -- a shorter one for accidents,
a longer one for sickness. Elimination periods under short-term
policies generally range from 0 to 14 days, depending on the terms
of the policy. Elimination periods under long term policies, on
the other hand, are longer, ranging from 30 to 720 days, although
a 90-day elimination period is most common.
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They offer different maximum
benefit periods
If you suffer a disability, you'll receive benefits until you recover
or reach a certain maximum. By definition, short term disability
policies pay benefits for up to two years, although many policies
pay benefits for only three months, six months, or one year. Long-term
disability policies, on the other hand, pay benefits for a far longer
period--for a few years, up to age 65, or even for a lifetime.
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Should I buy long term disability insurance or short term disability insurance?
If you can't afford to purchase both, it generally makes more sense
to purchase long-term disability coverage. Even though most disabilities
last only a short-time, you may be able to financially survive a short-term
disability, even without insurance. On the other hand, without insurance,
a long-term disability insurance can seriously threaten your finances.
However, consider these factors as well :
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What other protection you have
If you suffer a disability, you may be eligible for benefits from
a government-sponsored disability insurance program such as Social
Security or workers' compensation (if your disability was work-related).
Your employer may also provide coverage, although employers offer
short-term coverage more frequently than long-term coverage. Don't
buy a policy that duplicates coverage you already have elsewhere. |
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The type of coverage you can
afford to buy
Consider what you can afford to buy. Short-term coverage is typically
less expensive than long-term coverage because benefits are paid
for a shorter period of time.
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How do I buy a short term or long term disability insurance policy?
You can buy disability insurance through a private company that sells
individual policies, or you can purchase group disability insurance
through an association to which you belong or through your employer.
Employers may also offer you a certain amount of disability insurance
at no cost to you as part of your employee benefits package.
