Published on: August 29, 2022
According to data compiled by the Social Security Administration, 1 in 4 20-year-old workers will be disabled and unable to work before reaching retirement age. That’s a pretty sobering thought that could make you consider the advantages of long term and short-term disability benefits to support you and your family in case of an injury or illness that prevents you from working.
To help you to make a decision between a short-term disability policy or a long-term disability policy, you need to understand how each of them works and what they pay. As you read through the information provided here, remember that answers to all of your questions about disability claims is available from the Disability Experts of Florida, which has been helping people to resolve issues related to disability benefits for more than 35 years.
What Are Disability Insurance Policies?
Disability insurance policies are available either directly from an insurance company or as an employee benefit offered by some employers to their workforce. The policies are offered as short-term policies or long-term policies depending on how long they pay benefits to an insured worker who becomes disabled and cannot work.
The terms of a policy depend on what you want to pay for and what the insurance company is willing to offer. If you have coverage through a policy offered by your employer, the terms and benefits are set by the agreement reached between the employer and the insurance company.
There are two types of disability insurance policies depending on the benefit period that you select:
- Short-term disability insurance: A physical or mental health impairment that prevents you from working for less than a year typically would be covered by a short-term disability policy. You can choose whatever length of time you wish for the benefit period. Typical benefit periods are 3 to 12 months. The premium that you or your employer pay for the policy is based on the amount of the benefit and the length of time that it is paid by the insurance company.
- Long-term disability insurance: Long-term policies pay for a longer period that you are out of work than do short-term policies. Benefit periods may be chosen for whatever number of years that you want and that the insurance company is willing to offer.
Both short-term and long-term policies generally have waiting periods before benefit payments actually begin. For example, if you have a short-term policy with a waiting period of seven days, you cannot collect benefits for the first seven days from when you became disabled and unable to work. Shorter waiting periods generally mean the premiums that you or your employer pay for the policy will be higher.
How Much Does A Short-Term Policy Pay?
It would be very expensive to have a short-term disability policy pay the equivalent of what you earned while working. The premium charged by an insurance company for such a policy would be extremely expensive.
It is more common for a short-term disability policy to pay up to 70% to 80% of a person’s weekly earnings. You have the option to choose how much a policy will pay, but keep in mind that receiving a greater percentage of your earnings from the policy benefits will cost more in terms of the premiums charged by the insurance company.
How Much Does Long-Term Disability Insurance Pay?
Long-term disability benefits usually cover only a portion of what you earned while working. The amount depends on the maximum benefit the insurance company allows and how much you want to spend on the policy. The greater the percentage of earnings that you receive if disabled, the more the insurance charges for the policy.
Typical long-term disability pay is about 60% of what you earned when working. Long-term and short-term disability benefits generally are not taxable as income, so the fact that you only receive a percentage of what you normally earn is offset by the fact that you will not be asked to pay income taxes on the benefits.
The waiting period before disability benefits begin can be used to reduce the cost of a policy. Longer waiting periods have lower premiums than policies with shorter ones.
Social Security Disability Benefits May Offer An Alternative
A medically determinable physical or mental impairment that limits your ability to engage in substantial gainful activity may allow you to qualify for disability benefits through the Social Security Disability Insurance and Supplemental Security Income programs administered by the Social Security Administration. If the impairments are expected to last for at least 12 months or result in death, Social Security disability benefits may provide an alternative to private disability insurance policies.