What is the Difference Between Short- and Long-Term Disability Coverage?

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Insurance is often a very complicated topic for many to understand. Riddled with unique jargon, overlapping and sometimes contradictory concepts, and inconsistent interpretations, it can be quite confusing to the average person. One example of where this confusion may arise is in the distinction between short- and long term-disability coverage.

In simplest terms, short-term disability (also known as “STD”) covers a percentage of an insured person's lost salary should injury or illness prevent them from working for more than a few days. Payments generally begin when the insured has exhausted their available sick leave at work (i.e., when their regular paycheck ends). In the first few weeks of STD payments, the insured usually receives something comparable to their salary, but often drops precipitously (often up to 60%) after a few weeks. The coverage is short-term because it has a finite number of payments. This will vary from policy to policy, but somewhere around six months is fairly typical. After that, the insured is once again on their own, recovered or not.

Long-term disability (also known as “LTD”), on the other hand, is designed to protect an insured from catastrophic illness or injury that permanently end the insured's ability to earn a paycheck. These policies are usually designed to pick up where a short-term disability policy would end: after about six months of disability with no sign of immediate recovery in the near future. Although a few will run until age 65 (the traditional retirement age in America), many will only last for five to 10 years.

In both instances, these types of coverage do not necessarily prohibit recovering money for other expenses caused by the injury or illness. For example, if the injury resulted from an accident at work, there may be worker's compensation insurance coverage or even a direct liability on the part of the company for which you could receive legal compensation. If the injury happened through a car accident, there may be overlapping auto insurance coverage or liability on the part of the other driver. Whatever the source, short- and long-term disability policies will usually allow the disable to receive both the payout under the policy terms, as well as the income from the outside source without penalty, but this varies among insurance companies, so be sure to check your policy closely.

When deciding which coverage to obtain, it is best to consult with an insurance broker. They can explain the different options that are available to you, provide you with quotes, and help you with the necessary forms. However, it is also probably wise to shop around for the best possible coverage and rates. As noted, be sure to read the fine print and make sure you are comfortable with it before you buy something. While it may be tempting to rely on a broker to interpret a confusing contract term for you, if you are truly in doubt you should ask an outside attorney for advice. The broker is not legally qualified to give a legal opinion, and his interpretation may be more geared toward persuading you to purchase a policy than to give you a fair and unbiased reading. Similarly, if you have been injured, or know someone who has, and you have questions about their existing insurance coverage, an attorney can assist you not only in making your claim to the insurance company, but possibly pursuing other parties who may have been responsible for the injury or illness.

For a list of attorneys in your area, visit our Law Firms page.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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