Short-term or long-term disability — What to buy?

If you’ve decided to secure disability insurance, you should take a moment to congratulate yourself. Prudence will pay dividends if an injury or illness keeps you out of work.

You may have questions, however, about what type of disability insurance is best. Specifically, whether you should seek short-term, long-term, or perhaps even both types of coverage.

The reality is that there is no definitive answer. Indeed, it depends purely on one’s household needs, economic outlook and budget constraints.

However, it may help to consider the following distinctions when assessing your individual disability coverage needs.

Length of disability benefits

Most short-term policies last anywhere from three to six months with some spanning up to 24 months. In contrast, long-term policies can last for years — sometimes up to age 75.

Years of reliable payments come at a cost, as long-term disability premiums are typically much higher.

Amount of disability benefits

Long-term policies typically pay up to 70 percent of a person’s salary. In contrast, short-term policies typically pay 80 percent of salary in the first few weeks then decline. Once short-term benefits run out, policyholders are on their own.

Waiting period for disability benefits

Insurers typically remit the first check for short-term disability claims within a few weeks. However, the wait is often lengthier for long-term disability claims — generally three to six months.

The delay means that long-term policyholders will have to cover their expenses at the outset. Unfortunately, they’ll probably need to dip into their savings for a few months.

Source: FindLaw, “Long-term vs. short-term disability insurance,” April 2017