Short-Term vs. Long-Term Disability Insurance: What’s the Difference?

What Is Short-Term Disability Insurance?

Short-term disability insurance (STD) helps replace lost income if you can't work due to a short-term health condition, such as an illness, injury, mental health issue or pregnancy. Policies typically offer coverage from three months up to two years and replace around 60% of your income. Most short-term disability policies have up to a two-week waiting period before benefits begin paying out.

What Is Long-Term Disability Insurance?

Like short-term disability coverage, long-term disability insurance (LTD) offers income replacement, usually around 60%, if you can't work because you're injured or sick. But unlike short-term policies, with long-term disability insurance, coverage is extended for a few years, until retirement age or potentially for the rest of your life. Long-term disability insurance typically comes with a longer waiting period than short-term disability, often 30, 60 or 90 days.

Short-Term vs. Long-Term Disability Insurance

Short-term and long-term disability insurance both provide financial protection for lost wages when you're unable to work due to a medical issue. But they offer coverage for a different amount of time. While short-term disability may only replace your income for a few months, some long-term disability policies can protect you until the end of your life.

Reasons for filing short- or long-term disability claims also vary. According to the Council for Disability Income Awareness, the most common short-term disability claims include pregnancy; musculoskeletal disorders of the back, spine and body; injuries, like fractures and sprains; mental health issues; and digestive disorders. These conditions are also common with long-term disability claims, along with cancer and circulatory issues, like heart attack and stroke.

Should I Get Short-Term or Long-Term Disability Insurance?

Not having short-term or long-term disability insurance can have serious financial consequences, though it's important to weigh the costs and risk. Here's a closer look at when it may be beneficial to get short-term disability insurance and when to consider getting long-term disability insurance.

When to Get Short-Term Disability Insurance

Short-term disability can help you out financially if you experience an unexpected health situation, like an injury, or planned medical event, like pregnancy. Common scenarios when you might consider short-term disability insurance include:

• You anticipate being out of work for a short period of time. Short-term disability can support you financially when you know you'll be out of work due to a planned surgery, pregnancy or other known medical situation.
• You have limited savings or financial resources. If your emergency fund isn't able to cover at least three to six months of expenses—like groceries, utilities, rent and other bills—short-term disability can help you make ends meet if an injury or illness keeps you out of work temporarily.
• Your employer offers it as a benefit. Short-term disability policies offered through your workplace are often low cost or free. And there's typically no need to provide your medical history.
• You don't have short-term disability coverage through an employer. If you work for yourself, your employer doesn't offer STD (or the plan is limited) or you leave your job, you may decide to buy an individual short-term disability policy.

When to Get Long-Term Disability Insurance

Long-term disability insurance can help protect you financially if you're unable to work for an extended amount of time—or never again. Consider getting a long-term disability policy for the following scenarios:

• You're at risk for developing a chronic illness. If you have a personal history of chronic illness or known risks in your family, like a history of cancer, long-term disability insurance can offer peace of mind.
• You're at risk for injury. Whether you have high-risk hobbies, a bad back or are involved in other situations that put you at risk for injury, long-term disability may be a good idea.
• You're the primary earner. If you're single or your family relies on your income, being out of work could have serious financial consequences. Long-term disability insurance offers a safety net.
• Your employer offers it as a benefit. As with short-term disability insurance, long-term disability coverage is commonly available as an employee benefit for little to no cost. And you typically don't have to provide information about your medical history.
• You don't have long-term disability coverage through an employer. Long-term disability coverage offers added peace of mind if you're not able to get coverage through an employer or if you want extra coverage that extends beyond your employer policy.

When to Get Both

Generally speaking, it's a good idea to carry both short-term and long-term disability insurance or have it available through your employer. Short-term disability only helps replace your income if you're out for a few weeks or months. So for more serious conditions, long-term disability insurance adds extra financial security.

You may also want to have both types of disability coverage if you're single or other people depend on your income, such as a non-working spouse, children or aging parents. Carrying both types of coverage also supports you (and your loved ones) financially if you have a lot of debt, like student loans or a mortgage.

Tip: When you have both long-term and short-term disability, short-term disability usually serves as a bridge while you wait for your long-term disability coverage to kick in.

Learn more: Do I Need Disability Insurance?

How to Get Disability Insurance

Disability insurance is commonly available from employers. But if your employer doesn't offer coverage, you want to purchase more coverage or you're self-employed, you can buy an individual policy. Check with your state department of insurance if you need a referral to insurance companies and agents who handle disability insurance.

Consider how much coverage you can afford. Employer policies are typically free or low-cost, but individual insurance can be expensive.

What Factors Affect Disability Insurance Costs?

Several factors go into how much you'll pay for disability insurance.

• Age, gender and overall health: Employers may not require your medical history to sign up, but you may have to share details about your physical and mental health history when buying an individual policy.
• Waiting and benefit periods: A plan with a longer waiting period often costs less, while a lifetime policy generally costs more than a policy ending at retirement age.
• Your coverage needs: Your income and the percentage of income you want to replace also impact your premium.

Tip: Consider your monthly expenses, long-term debts and other sources of income. If you're not sure how much disability coverage you need or the type of policy to buy, an insurance agent can help you run the numbers.

The Bottom Line

Short-term and long-term disability insurance offer protection if you're unable to work due to an illness, injury or other health-related situation. If you don't have coverage and are out of work long term, you may need to apply for state and federal assistance, such as Social Security Disability Insurance (SSDI), Medicaid or disability coverage for veterans.

You may never need short-term or long-term disability insurance, but the peace of mind it provides could make acquiring it, through your employer and individually, worth it.