Short-Term versus Long-Term Disability Insurance Coverage

There are two primary types of disability coverage you should consider offering to your employees:
  • Short-Term Disability Insurance (STD). Short-term policies pay benefits for short periods of time – typically three months, six months, or one year, after a brief waiting (elimination) period. Short-term disability insurance can be very expensive to purchase as an individual, but group plans are typically less expensive than long-term group plans. Many employers offer a short-term group plan as a company-paid benefit to all employees.
  • Long-Term Disability Insurance (LTD). Long-term disability insurance has an elimination period of at least 90 days. After that, benefits are paid for a longer term, typically, two years, five years, 10 years, to age 65, or for life, depending on the policy. The longer the benefit period, the higher the premium.
If you can’t afford to offer both types, it may make more sense to offer these benefits as voluntary coverages (premium paid all or in part by the employee) or set up a long-term policy. With a long-term policy, you and your employees are covered for a catastrophic illness or accident, which could have more devastating financial impacts.

Game Plan

Because there are limits on short-term and long-term group disability benefits, it’s important to consider supplementing your group policy with individual policies – particularly for higher-paid employees – so you can have the security of benefits that will replace a greater percentage of your income. Talk to your insurance professional to learn more about the options appropriate for your business and industry.
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