You can find dozens of “long-term disability vs short-term disability” pages on the web, but most of them are about as exciting as watching bread bake. The problem is that disability insurance, like every other financial product, can be fine tuned a dozen different ways until it fits your needs exactly—but explaining all of those options at once is overkill if you’re approaching the topic for the first time.
So let’s step back and answer the big questions, like: What is it? How is it different from short-term disability? And do I even need it?
Long-term disability vs short-term disability explained
1 – Long-term disability kicks in after your short-term disability and employer benefits end—there’s no overlap.
They’re separate insurance products because they cover entirely separate periods. Short-term disability insurance covers the first few weeks or months when you can’t work, but then it ends. Long-term disability insurance starts paying at some point after that and lasts much longer, because it’s designed to protect your income if you’re disabled for more than a couple of months.
The trick to buying the right amount of disability insurance is to make sure you don’t leave a gap in coverage between when your short-term policy benefits end and your long-term policy benefits begin, because the bigger the gap, the longer you’ll have to go without any replacement income.
One out of every four workers will face a long-term disability at some point in their careers.
And no, it’s not possible to stack the policies to achieve a higher total payment amount, because most long-term disability insurance policies won’t pay until you’ve exhausted any short-term or employer benefits first.
2 – Long-term disability costs more than short-term disability because it provides better protection.
Long-term disability insurance lasts longer and can be customized more than short-term disability insurance, which makes it more expensive. But it’s actually more valuable than short-term disability insurance, for reasons which we’ll explain below.
So how much does it cost? Like life insurance, the price is based in part on things like your age, sex, occupation (as in, “how dangerous is your job?”), the length of the coverage period, and how much of your salary you want to replace. Generally speaking, though, you should expect to pay between 1-3% of your salary. So for example if you make $50k a year, your premiums could run between $50-$125 per month.
However, the amount you end up paying also depends on whether some or all of your long-term disability coverage is purchased through a group employer plan—especially if your employer helps pay for it.
3 – You can buy long-term disability on your own, but short-term disability is only available through your employer.
Some employers – especially larger employers – 0ffer long-term disability insurance. If your employer does, make sure you’re enrolled! Employer-sponsored long-term disability is good-value coverage because you’ll benefit from group rates and you won’t have to deal with medical underwriting. It’s even possible in some cases to turn a group long-term disability policy into a private long-term disability policy if you leave or change jobs (this is called “portability”). However, the majority of private sector workers don’t have access to employer-sponsored long-term disability insurance. So the most likely scenario is that you’ll buy long-term disability insurance on your own. (And we can help get you up to speed on how to find the best value with our long-term disability shopping guide.)
Short-term disability insurance is only available through your employer. Your employer may or may not offer it (but if you live in California, Hawaii, New Jersey, New York or Rhode Island, your employer might be required to provide short-term disability coverage). If your employer doesn’t offer short-term disability coverage, you can’t buy a policy on your own. You’ll have to self-insure with savings for the 1-4 months that short-term disability insurance would cover.
4 – Long-term disability coverage can last for years, while short-term disability coverage lasts weeks or months.
Long-term disability insurance policies cover periods from a couple of years to the rest of your life (the ideal policy covers you until age 67). Short-term disability insurance tends to cover between 30-120 days.
5 – Long-term disability insurance is the coverage you should worry about
One out of every four workers will face a long-term disability at some point in their careers. Imagine you’re part of that unlucky 25 percent and that you have no disability insurance. If the disability lasts 3 months, you may be still able to struggle through it with the help of employer benefits, cash savings, and lines of credit.
Now imagine that the disability doesn’t end at 3 months but instead lasts 2 1/2 years or more, which is the average length of a long-term disability. How do you make up for lost income every month for 30 months in a row? With long-term disability insurance, that’s how.*
* Some might say “With Social Security Disability Insurance (SSDI), that’s how.” But SSDI is much harder to get than most people realize, and it can take a year or more to be approved. It’s an important part of your income replacement plan but it can’t compete with long-term disability coverage.