Is short-term disability insurance worth it?

Most employers offer short-term disability insurance for free or at a subsidized rate. When that's the case, 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 an individual short-term disability plan outside of your employer, however, can be costly and probably isn't worthwhile. Instead, you should consider purchasing long-term disability insurance (which lasts longer) and utilizing any free short-term plans that are available to you.

Do I need short-term disability insurance?

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 may not cover you for the entire duration of your disability, but it complements long-term disability insurance nicely.

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

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, you receive benefit payments that replace your income. The difference is that it takes at least 90 days to get long-term benefits.

Unlike short-term disability insurance, long-term disability can pay out up until retirement. The average long-term disability claim lasts for 35 months. [1]

Both types of disability insurance cost about 1% to 3% of your income — but because short-term plans offer less coverage, they're too costly for what they offer. Short-term disability and long-term disability insurance are designed to be used in tandem. 

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

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. It could easily cover you when you have a short-term disability, until a long-term policy kicks in.

(If you receive short-term disability benefits from an employer, you should still have an emergency fund, so you can use the savings for other purposes, like medical emergencies.)

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

Depending on where you live you may be able to get temporary state disability insurance, which pays a smaller benefit, also for a limited period of time.

Should I 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, since short-term disabilities are much easier to cover out-of-pocket than long-term disabilities, which might be total and permanent. Supplementing an emergency fund with long-term disability coverage is the best way to be prepared if you become disabled, rather than buying short-term disability outside of your employer.

You can get disability quotes for long-term disability insurance with Policygenius — a licensed agent can help you find an affordable disability policy that suits your personal situation.

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 benefits.