Car wrecks and accidents that are a result of someone else’s negligence throw your world into disarray.
As our clients tell us, first there’s the crash. Then, there’s the crisis. And just how long you will have to survive in crisis mode depends on the severity of your injuries.
Thankfully, insurance does offer some protection for these types of situations in the form of short- and long-term disability coverage.
What is this exactly? And should it be part of your insurance policy? Here’s what to know.
The Long and Short of It
The amount of time someone can receive disability benefits is called the benefit period. A natural place to start comparing short- and long-term disability policies is how long they last. Going by their names, it’s obvious that one lasts longer than the other, but what exactly do short-term and long-term mean?
Short-term disability benefits typically last between three to six months. Long-term benefits are measured in years; you can apply for a benefit period that lasts two, five, or 10 years.
Broadly speaking, the shorter the benefit period, the cheaper the disability policy. But keep in mind that the average disability lasts around three years; one of the problems with short-term disability insurance is that the coverage isn’t adequate for most people. At best, short-term disability insurance should supplement long-term disability insurance, the former providing income protection until the latter kicks in.
Brad Parker says, “Broken bones, a heart attack or issues related to pregnancy would qualify as a short-term disability. Long-term disability would be situations such as paralysis, permanent loss of a limb, chronic exposure to hazardous materials that caused disease or brain injuries.”
If your employer provides both long-term and short-term disability benefits, they will often be designed so that your short-term disability benefits cover you until you are eligible for long-term benefits. But if you are presented with several options, you’ll want to be careful with your selection. If you leave a gap in your coverage you’ll have to use savings or debt to get by in between – not a good idea!
Your employer may offer one or both types of disability insurance. You may also buy a long-term disability policy on your own. Short-term disability coverage that you can buy on your own is less common, but it does exist.
“Be sure to look hard at the fine print and the language in the insurance policy. The definition of disability is very important. What does it say? Does it stipulate that you can’t return to any form of work or you can’t return specifically to a job in that field? Maybe you will be covered if you can’t go back to your job as a mechanic, but it doesn’t prevent you from flipping burgers at McDonald's,” Brad says.
Short-term policies are designed to pay benefits much sooner than long-term policies. Most short-term disability plans have waiting periods that range from zero to two weeks. Some short-term policies have different waiting periods based on the nature of your disability, so there might be a shorter waiting period for disabilities arising out of accidents as opposed to disabilities resulting from illnesses.
Waiting periods for long-term disability insurance policies, waiting periods are typically much longer. The most common waiting period for a long-term policy is 90 days, although this can vary from as little as 30 days to more than two years.
Brad says, “It’s important to understand that if you become disabled and are unable to work, your long-term disability policy benefits are not available until after this period has passed. That means that you may need to rely on savings, short-term disability coverage or worker's compensation insurance before your long-term disability policy is there to help ease the financial burden.”