Is short-term disability insurance worth it?


Yes, most people should opt in to their employer-sponsored short-term disability plan, which is usually free or subsidized. An individual short-term plan isn’t usually worthwhile.

Nupur Gambhir


Nupur Gambhir

Nupur Gambhir

Life Insurance Expert

Nupur Gambhir is an insurance editor at Policygenius and licensed Life, Health, and Disability agent in New York.

Updated October 5, 2021|3 min read

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Most employers offer short-term disability insurance for free or at a subsidized rate. These short-term plans are worth incorporating into your financial strategy because they offer some financial support for a disability that lasts under a year. Buying a private short-term disability plan, however, can be costly and not worthwhile. Instead, you should consider buying a long-term disability plan and utilizing any free short-term plans that are available to you.

What exactly is short-term disability insurance?

Short-term disability insurance replaces about 60% of your gross income for a short period of time if you experience a disability — usually three to six months.

You’re more likely to experience a disability than you might think – one in four workers experiences a disability before they retire. On top of that, 46% of Americans wouldn’t be able to cover a $400 emergency expense without resorting to credit card debt or a family loan. If you were unable to work due to a short medical emergency, how would you pay for it?

That’s where short-term disability insurance comes in. A short-term disability plan’s limitations mean that it may not cover you for the entire duration of your disability, but it complements long-term disability insurance nicely. 

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Short-term disability insurance vs. long-term disability insurance

Long-term disability insurance serves the same purpose as short-term disability insurance — if you can’t work, your policy replaces your income. The difference is that it takes at least 90 days to start paying out, but can sometimes take as long as 180 or 360 days. And unlike short-term life insurance, long-term disability can pay out up until retirement. They both cost about 1-3% of your income — but because short-term plans offer less coverage, they’re too costly for what they offer.

As you can probably already tell, short-term disability and long-term disability are designed to be used in tandem. While long-term disability doesn’t kick in for three to six months, it can last for years. The average long-term disability claim lasts for 35 months.

→ Learn more about the differences between short-term and long-term disability insurance

What are the alternatives to short-term disability insurance?

If you can’t get a short-term disability plan for free or at a low cost from your employer, the best alternative is to self-insure with an emergency savings fund. Most financial experts suggest that you have an emergency fund of anywhere between three and six months salary anyway, which, combined with a long-term policy, can easily cover you during a short-term disability.

However, if you don’t have that emergency fund then you need short-term disability insurance. If you receive short-term disability benefits from an employer, and they pay 100% of your premiums or the cost is relatively low, it makes sense to have both an emergency fund and short-term policy so that your hard-earned savings can be saved for other purposes, like home repairs or medical emergencies.

The federal government does not supply any kind of coverage for short-term disabilities. Social Security Disability Insurance, or SSDI, is designed to cover long-term disabilities. 

Where to buy short-term disability insurance

Most people get short-term disability insurance through their employer. Talk to your human resources department for more information. 

If your employer does not offer a short-term disability policy, you can buy an individual policy to cover part of your risk until your long-term disability policy kicks in through Policygenius partner LifePreserve.

Should you get short-term disability insurance?

We only recommend short-term disability insurance if your employer offers it for free or at a low cost. Private short-term disability plans aren’t worth your money because they can be just as expensive as long-term disability insurance despite having a shorter coverage period. 

That money would be better spent paying into an emergency fund, as short-term disabilities are much easier to self-insure than long-term disabilities. Supplementing that emergency fund with long-term disability coverage is the best way to be prepared if you become disabled.

Frequently asked questions

Is paying for short-term disability insurance worth it?

Paying for short-term disability insurance on your own usually isn’t worth the cost. Instead, you should utilize an employer-sponsored plan or your savings.

What is short-term disability insurance good for?

Short-term disability insurance is good for replacing your paycheck if you’re too ill or injured to work for three to six months. If you’re disabled for longer than that, however, you’ll need a long-term disability plan.

How should I use short-term disability insurance?

Short-term disability insurance should be used in tandem with long-term disability insurance. A short-term plan will replace your income for a limited time while you wait for your long-term plan to start paying out.