What Is Short- and Long-Term Disability Insurance and Do You Need It?

Getting sidelined by illness or injury certainly takes a toll on your health, and it can take weeks for you to recover so you can return to work. However, if you are sidelined for longer than a month or two, it also could start to take a toll on your finances. After all, medical expenses can add up quickly, draining your savings and leaving you scrambling for the necessary funds to pay not only your basic living expenses but also those mounting medical bills. In fact, per CNBC, two-thirds of people who file for bankruptcy cite medical issues as a key contributor to their financial downfall.
By having short- and long-term disability insurance, though, you could get the financial assistance you need when illness or injury occurs. Here is what you need to know regarding what is covered, what is not covered, a general idea of costs, and how to decide if you need coverage and, if so, what type and how much.

What is short- and long-term disability insurance?

Short- and long-term disability insurance benefits replace a portion of your regular income if you are unable to work due to illness or injury. Many people think of illness or injury as recovering from injuries sustained in a car wreck, breaking a bone playing sports, or being hospitalized with pneumonia. And that’s true. However, it also could apply to mental health issues, recovering from a heart attack, or undergoing cancer treatments.
Keep in mind disability insurance coverage does not apply to any illnesses or injuries sustained at work. In most cases, those illnesses or injuries should be covered under workers’ compensation coverage, which your employer should provide.
Having a financial safety net is essential to help pay your regular living expenses as you recover, as well as your medical bills. Depending on the policy, you could receive up to 70% of your income for a specified period ranging from three months up to the time you are old enough to retire.
As the names imply, short-term disability insurance has a shorter benefit period than long-term disability policies do. Typically, short-term disability coverage offers benefits for three to six months, while the benefit period for long-term disability coverage is measured in years. This could range from five years to the time you reach retirement age.
They also offer different levels of coverage, which could help determine which policy best suits your needs. With short-term disability plans, you may receive benefits up to 70% of your regular income. For long-term disability plans, the number of benefits could range between 40% and 70% of your regular income.
HeaderShort-term disability insuranceLong-term disability insurance
Length of coverageTypically 3 to 6 months5 years or more, possibly to retirement age
Amount of coverageUp to 70% of your incomeBetween 40% and 70% of your income
Length of waiting period for benefits to startApproximately two weeks from the date of disability confirmationTypically between 90 and 120 days
CostBetween 1% and 3% of your annual incomeBetween 1% and 3% of your annual income

What is covered by short- and long-term disability insurance?

Unlike other types of insurance, the type of coverage with a disability insurance plan focuses on two components: how much your benefit is and how long you will receive it. The monetary payment is sent to you in regular payments — weekly, monthly, etc. — for a specific period. There are no restrictions on what you can spend the money on, so you can use it to pay your mortgage, put gas in the car or pay a copay at your doctor’s office.
It’s important to note benefits do not start right away. Each disability insurance plan includes an elimination period, also known as a waiting period. The elimination period is the length of time from the date your physician confirms you have a disability to the day you are first eligible to receive benefits. With short-term disability insurance, the elimination period is approximately two weeks, while typical elimination periods for long-term disability insurance are either 90 or 120 days. Although you can choose which elimination period you want, the longer the elimination period is, the lower your premium rates will be.

What is not covered by a disability insurance plan?

Because disability insurance coverage is designed to replace a portion of your income, it may not cover your medical bills or any expenses for long-term care such as assisted living or nursing home costs. In addition, your insurance company defines what is considered a “disability,” so — before making a plan purchase — it’s important to go over those definitions at length so you have a thorough understanding of what qualifies if you need to file a disability claim.
With long-term disability insurance, there are two key definitions you should know. The first is “own occupation,” which means you are disabled from performing your regular occupation. The second is “any occupation,” which means you are disabled from performing any type of work. It is imperative to discuss these terms as they apply specifically to your job to determine which policy best serves your needs. In many cases, any-occupation policies usually are less expensive than own-occupation policies.
Short-term disability insurance plans usually cover pregnancy, but long-term disability insurance plans typically do not unless you have a complication that dictates staying at home for a prolonged period of time beyond maternity leave. However, you must have your disability insurance plan in place before you get pregnant to qualify for benefits.

What companies offer short- and long-term disability insurance?

For some, their employee benefits may include short- and long-term disability insurance. If that’s the case, purchasing a plan through your employer likely will cost less than purchasing an individual plan. However, if you change jobs, you may not be able to take your disability insurance coverage with you. It’s important to speak with your human resources associate to get the specific disability insurance information available to you.
If your employer does not offer short- and/or long-term disability insurance, you are self-employed or you want to purchase additional coverage, you can purchase your own short- and/or long-term disability insurance policy from many insurance companies. Start by talking with your current auto, home, or life insurance company to see if they provide short- and/or long-term disability insurance. If so, you may find the rates are more affordable than buying a standalone policy from a separate insurance company.


Well-known for providing life insurance coverage, Ameritas also offers a selection of supplemental insurance including disability insurance. However, you cannot get a quote online; you will need to contact an Ameritas financial professional to get an exact quote and to purchase a plan.


Guardian offers disability insurance plans for individuals as well as supplemental coverage for those who have employer-provided short- and long-term disability benefits. You can use the company’s disability insurance calculator to get an estimate on how much coverage you need and how much your premium would be.

Mutual of Omaha

Providing both short- and long-term insurance policies under its “Mutual Income Solutions” product, Mutual of Omaha allows you to customize your policy to fit your needs and budget. If you qualify, you could receive a maximum monthly benefit of up to $20,000 per month. Although you can get sample premium ranges based on your occupation, you will need to talk to an agent for an exact disability income insurance quote and to purchase coverage.

How much does short- and long-term disability insurance cost?

Like other insurance policies, the cost of short- and long-term disability insurance depends on the type of disability insurance plan as well as the amount of coverage. As such, you first need to determine if you want short- or long-term disability coverage. Then you need to determine how much coverage you want.
When calculating the amount of coverage, add up your monthly expenses. How much of your current income is required to pay these expenses? Although you cannot get a disability insurance plan that pays 100% of your income, you can get one that pays as much as 70% of your income.
If you can afford it, your best option is to get a policy with the maximum amount the insurance company will approve you for to ensure you have the funds you need to pay your monthly expenses. However, the more coverage you get, the higher your premiums will be. Remember, too, that the elimination period you choose will affect how much your premiums are. The longer the elimination period, the lower your premiums will be.
Keep in mind, too, several additional factors are considered when determining how much your disability insurance plan will cost. These include gender, age, tobacco use, where you live, what you do for a living, and who the insurance company is.
Generally speaking, the cost of your disability insurance plan will be between 1% and 3% of your annual income. For example, using Guardian’s disability insurance calculator, for a 42-year-old male working as a sales associate in Georgia and making $90,000, the estimated monthly cost for a policy with $5,000 maximum benefits per month for two years following a 90-day elimination period is $99 per month or $1,188 per year.

Pros and cons

Deciding if short- and/or long-term disability insurance is right for you depends on your circumstances and financial needs. It’s important to weigh the pros and cons before making a decision.
  • Disabilities can happen to anyone. According to the Social Security Administration, approximately 1 in 4 of today’s 20-year-olds will become disabled before they reach age 67. Having disability insurance coverage could help you weather a financial storm.
  • You protect your loved ones from debt. By having a disability insurance plan, you can continue to provide for your loved ones while helping keep debt to a minimum.
  • Disability insurance benefits can supplement government-administered benefits. If you receive disability insurance benefits through the Social Security Administration, you can still receive benefits from your private insurance plan.
  • If you have healthy savings, don’t pay for short-term disability insurance. Because short-term disability insurance only covers up to six months, you’re better off building up your savings equal to three to six months of your income so you have a cushion when you need it. Plus, you can access your savings right away without the hassle of filing a disability claim with the insurance company.
  • Not all medical conditions qualify as a disability. If your injury is self-inflicted or is incurred at work, your disability claim may be denied. There also may be limitations or exclusions if you have pre-existing conditions, particularly for short-term disability insurance coverage.
  • Private disability insurance could affect government-administered benefits. If you qualify for disability benefits through the Social Security Administration but you exceed the monthly income limits as a result of your disability insurance benefits, you could receive reduced or no benefits through Social Security.

The bottom line

Short- and long-term disability insurance coverage could provide much-needed financial assistance if you find yourself unable to work for a prolonged period due to illness or injury. Depending on the coverage, you could receive between 40% and 70% of your income for a period ranging between three months and up to the time you reach retirement age. Generally speaking, the cost for disability insurance coverage ranges between 1% and 3% of your annual income.
Deciding if disability insurance coverage is right for you, and, if so, which type of coverage is best, depends upon your circumstances and financial needs. It’s important to review all coverage options and rates before making any purchase.

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