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Insuring Your Future: Understanding Short-Term Vs. Long-Term Disability Plans

December 13, 2023
by Dickstein Associates Agency

Security, safety, and peace of mind are the things we desire for our future. In the hustle and bustle of everyday life, it’s easy to lose sight of long-term plans, especially when focused on immediate needs. However, planning for unforeseen circumstances is a crucial aspect of financial well-being. One way to ensure this future security is through disability insurance plans, categorized mainly into short-term and long-term disability.

Understanding the difference between these two types of insurance, their benefits, costs, and when to use them could save you from financial hardships.

What Is Disability Insurance?

Disability insurance can replace a specific portion of your income should you become disabled and unable to work due to illness or injury. It acts as a safety net for your earnings, allowing you to support yourself and maintain financial stability.

Short-Term Disability Insurance

Short-term disability insurance replaces a portion of your income during a brief period of work disability and typically lasts for a few months up to a year. This kind of insurance generally covers 60% to 80% of your regular income.

Here are the key aspects of short-term disability insurance:

When does it kick in? Short-term disability policies usually begin within one to 14 days of an event that prevents you from working.
How long does it last? Coverage usually lasts three to six months, and some policies extend to one year.
What does it cost? The cost of short-term disability insurance varies depending on multiple factors, such as your age, health status, lifestyle, and occupation.

Eligibility: Short-term disability plans often have more lenient eligibility criteria. Some states require short-term disability benefits, which many employers offer.

Who benefits most: Short-term disability insurance is ideal for people with limited savings or sick leave because it provides immediate financial relief during health setbacks.

Critical industries: Construction and manufacturing, which involve physical labor and higher injury risks, benefit from short-term disability coverage.

Benefits and limitations: Short-term disability plans cover 60% to 70% of your salary. They have shorter coverage and waiting periods. Exclusions may include pre-existing conditions or elective procedures.

Long-Term Disability Insurance

Long-term disability insurance covers a longer period and comes into play after you have exhausted your short-term disability benefits or your employer’s sick leave. It generally provides 50% to 60% of your income.

Here are the key aspects of long-term disability insurance:

When does it kick in? The waiting period for long-term disability benefits can vary from several weeks to several months, usually after your short-term disability benefits are exhausted.
How long does it last? Coverage often lasts from a few years to the rest of your career or until you retire.
What does it cost? Like short-term disability insurance, long-term insurance costs vary but are generally 1% to 3% of your annual salary.

Eligibility: Long-term disability plans have stricter eligibility requirements and may require a waiting period.

Who benefits most: Long-term disability insurance is recommended for professionals with specialized skills or high earning potential.

Critical industries: Medicine, law, and entrepreneurship are vital industries that benefit from long-term disability coverage.

Short-Term Vs. Long-Term: Which One Do You Need?

Upon understanding the basics of both short-term and long-term disability insurance, your choice would then rest on your circumstances and financial strategy.

Before you buy, remember that some states, including New Jersey, have laws that cover Temporary Disability and Family Leave Insurance. Check with your insurance adviser for your location, and consider the following factors:

For young, healthy individuals with no dependents who have enough savings to cover three to six months of living expenses, short-term disability insurance might be sufficient.
If you have dependents relying on your income or lack significant savings, investing in long-term disability insurance can offer better financial security.
It’s complicated, and each situation is different. That’s why it’s vital to enlist the help of an experienced professional and trusted adviser to guide you through the maze of options.

Secure Your Financial Future

The bottom line is that your substantial income and your ability to generate it need the protection of disability insurance. It is essential for financial security. Knowing the differences between short-term and long-term disability plans helps you choose your best options. Disability insurance can help protect your current and future income and give you peace of mind about your financial future. Talk to an expert at Dickstein Associates Agency today.

About Dickstein Associates Agency

Dickstein Associates Agency is a leading insurance agency dedicated to helping individuals and businesses navigate the complex world of insurance. With a team of experienced professionals, we provide tailored insurance solutions to meet our clients’ unique needs. Whether it’s disability insurance, life insurance, or other forms of coverage, we are committed to protecting what matters most to you. Explore our extensive insurance options and consult our experts today to secure your future. Visit Dickstein Associates Agency to learn more.