What Is The Difference Between Short Term And Long Term Disability?

What is the difference between short term and long term disability? This question was posed to Mark Webb, Executive Vice President, Governmental Relations, of Employers Direct Insurance Company. "Disability...

This question was posed to Mark Webb, Executive Vice President, Governmental Relations, of Employers Direct Insurance Company. "Disability insurance can be either short term or long term," Webb explains. "Most short term disability insurance programs are offered on a group basis and through your employer. Short term disability (STD) insurance is of a limited duration, usually no more than 52 weeks, and pays a percentage of your income up to certain limits. For example," he offers in illustration, "if your employer purchases a plan that will pay 70% of your weekly salary for up to $3,000 of weekly earnings, then your weekly benefit would be $2,100. Because this is an employer sponsored plan, those payments would be subject to federal income tax. STD programs also have various conditions and waiting periods, such as requiring that you exhaust your sick leave before collecting STD benefits and a waiting period for certain medical conditions or illnesses. These are programs that do not usually require you to pay a premium, so check with your benefits coordinator at work to learn the specifics of your employer's STD program."

"STD policies sold to individuals are very limited in scope and usually are very expensive. As part of your overall disability planning, you should assess what resources are available to you in the event that you have a non-work related injury that would potentially cause an interruption in your regular monthly income. While technically not a short-term disability policy, a hospital indemnity plan may serve that purpose if you are concerned about expenses relating to a hospitalization. The assessment of your disability income needs should include what resources are available to you from government sponsored state disability programs if you live in a state that provides such benefits, the amount of vacation and sick leave you have at your disposal, and the amount of savings you maintain."

"Long term disability (LTD)," Webb continues, "is also a program that your employer may offer. LTD insurance lasts for a period of at least one year. Unlike STD, however, LTD products are readily available in the private insurance marketplace. LTD policies will pay from anywhere between 50% and 80% of your pre-injury weekly earnings up to a limit. As is the case with short term disability, limitations and waiting periods will apply. Employer sponsored programs may have limited benefit duration periods, such as five years or reaching age 65 whichever comes first, and may have extended waiting periods. For example, an employer sponsored program may not pay benefits until you have been working with the employer for at least one year. Employer sponsored plans are many and varied. If such a plan is offered by your employer, you should contact your benefits administrator to learn more. As is the case with STD benefits, benefits from employer paid plans are subject to taxation."

"If you do not have an employer sponsored LTD plan," Webb points out, "assessing your options in case of a disabling non-work related injury is important before you purchase a product. As is the case with STD products, a complete financial examination, including what benefits may be available from government programs, should be undertaken. In addition, while LTD products are readily available through the private insurance marketplace, you may also be eligible for LTD insurance from an association or professional organization of which you are a member or through your financial institution. Check the eligibility requirements and benefits of these programs before buying an individual policy. Benefits under individual plans can be more closely tailored to your needs and may offer longer benefit periods. The more generous the benefits and the shorter the eligibility or waiting periods, the more expensive the insurance will be."

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