Understanding Short-Term Disability, Long-Term Disability, and How They Fit Together

Both short-term and long-term disability insurance are vital for maintaining your financial well-being in case of a medical emergency. While short-term coverage will help you with a temporary injury or sickness for just a few months, long-term coverage can help in case you are diagnosed with a chronic illness or experience a life-altering accident.

Understanding these two kinds of insurance coverages and how they fit together can help you cover your bases in case you are ever physically unable to earn an income. While these issues may be far from your mind today, they can be life-saving for your future self, making sure you can keep paying the bills even without a steady income.

Keep reading to learn more about how short-term and long-term disability can fit together for your overall financial well-being!

What is Short-Term Disability (STD)?

Short-term disability (STD) insurance is a type of coverage that covers a portion of your income in case you experience a temporary illness or injury that prevents you from working. Unlike long-term disability coverage, this type of insurance has benefits that usually only last between three and six months. The standard benefit is typically 50% to 80% of your weekly gross pay.

To qualify for short-term disability coverage, you must prove you cannot perform your standard job duties due to your condition. Here are some common situations that qualify for STD coverage:

Injury from a car accident.
C-section recovery.
Long COVID.
Uterine fibroid removal surgery.
Childbirth and maternity leave.
Side effects from medical procedures.

Here’s what’s not covered under STD coverage:

Injuries sustained while committing a crime.
Cosmetic procedures.
Self-inflicted injuries.

You will not be able to receive benefits immediately after the injury. Most people have to wait a short period of time before receiving STD benefits, also known as the waiting period – the time between when you become injured and when you receive benefits. This period is usually around one or two weeks, but in some cases, it is longer or shorter. If you need to miss work due to your injury or illness during the waiting period, you will need to use your sick leave or paid time off.

If you have short-term disability coverage through your employer and need to file a claim, contact your human resources department. People with a private short-term plan can reach out to their insurance provider. You, your employer, and your healthcare provider will need to fill out some paperwork with details about your condition and why you cannot perform your job responsibilities. You’ll want these forms to be completed promptly – the sooner you submit them, the sooner your benefits will begin!

For example, let’s say that Alex has spinal surgery and cannot perform their job responsibilities since they will be on bed rest for the next two months. They contact their HR department and their doctor and get their documentation submitted within two days. Then, they must wait two weeks after they submit their paperwork before receiving benefits.

In the meantime, they take several days of PTO and live off the money in their savings account. Once the benefits kick in, Alex stays home from work and receives 80% of their gross income each week until they are well enough to return to work.

Can I get extended short-term disability?

In cases where recovery takes longer than expected, individuals may need extended short-term disability coverage to bridge the gap before transitioning to long-term disability. Extending your short-term coverage is difficult, but not impossible – you’ll have a few different options.

First, you’ll need to ask your doctor to provide documentation that you are still unable to perform your job duties. Then, you must submit this information to your employer or plan administrator and ask them to extend your short-term coverage. This won’t always work – if this request gets denied, you may need to apply for long-term disability insurance.

What is Long-Term Disability (LTD)?

Long-term disability (LTD) insurance is a type of coverage that will cover a portion of your income in case you experience a chronic illness or long-term injury or disability. LTD benefits usually last between two and ten years, on average, but some policies will cover you all the way up until retirement. You can expect the benefit amount to be between 50% and 80% of your weekly gross income.

You must prove that your condition prevents you from completing your job duties in order to qualify for long-term disability coverage. Here are some of the most common situations qualifying for LTD benefits:

Injuries like nerve damage, broken bones, or the loss of a limb.
Mental health conditions that require extensive outpatient or inpatient treatment – this could be anything from depression to PTSD.
Chronic conditions like arthritis, osteoporosis, fibromyalgia, lupus, or chronic back pain.
Other serious illnesses like cancer, heart disease, or heart failure.

Just like short-term coverage, you will need to have thorough documentation through your medical records to prove that you cannot perform your job duties. Immediately after your accident or diagnosis, be sure to promptly contact your employer or insurance company to submit the necessary paperwork and documentation needed to receive benefits and take disability leave.

Unlike STD coverage, long-term disability insurance requires a much longer waiting period to receive benefits, also called an elimination period. This period usually lasts between three and six months. In other words, you cannot get benefits immediately after becoming injured – you will typically need to wait several months before receiving any LTD benefits. This is where your short-term coverage comes into play, as it can make up the difference during the longer elimination period.

For example, let’s say that Sally is dealing with debilitating arthritis, which prevents her from performing her job. After getting her doctor’s signature and submitting all the paperwork to her insurance company, she must wait three months before receiving long-term disability benefits. If Sally doesn’t have short-term disability coverage, this leaves her without any way of earning money during the elimination period before receiving insurance benefits.

On the other hand, if she does have STD benefits, this can help her with rent, car payments, and grocery bills for a short period of time as she waits for the LTD elimination period to end.

Transitioning from Short-Term to Long-Term Disability

Short-term and long-term disability go hand-in-hand. You can set up your policies so that once your STD benefit ends, the LTD benefit will begin. This will prevent significant gaps in coverage.

Even if you are only expecting to be disabled for a few months, you’ll want to be covered in case your recovery takes longer than expected. If you need extended STD benefits, your long-term coverage will come in handy!

Although you may have enough savings to cover your expenses during the LTD elimination period, you want to cover your bases in case something goes wrong. Sometimes, benefits can get delayed due to an incomplete application.

You might also need to see your doctor more than usual to provide thorough documentation, test results, and expert opinions. Some policies require an additional independent examination to offer a second opinion from your primary medical provider.

If you experience these unexpected delays, short term disability can help you cover your daily expenses in the meantime. It never hurts to be extra prepared!

What Happens to Long-Term Disability if You Lose Your Job?

So, if you lose your job, what happens to your long-term disability coverage? The short answer is that it depends!

If you have an employer-sponsored long-term disability plan, you will also lose your LTD policy when you lose your job. On the other hand, if you have a private disability plan, you will keep your benefits as these aren’t dependent on your job status.

If you are currently receiving LTD benefits through your employer, then luckily, your benefits will not usually end even if you are terminated. The most important thing is when your disability began – if it started while you were still employed, your benefits will most likely continue through the benefit period.

However, if you purchase a private long-term disability policy, you don’t have to worry about whether the benefits will end with your job. Because this policy is separate from your employer, it doesn’t matter if you are laid off or fired; you’ll still have benefits as long as you pay for them.

One common concern while receiving LTD benefits is health insurance – if you are terminated, your employer health insurance will end, even if your disability benefits continue. Luckily, with COBRA, also known as the Consolidated Omnibus Budget Reconciliation Act, you and your dependents can temporarily keep your employer’s health insurance benefits after your employment has ended.

Importance of Both Types of Coverage

While the LTD and STD premiums might feel like a waste of money when you are working and healthy, both long-term and short-term disability insurance are extremely important in the long run – here’s why:

Financial Protection: Short-term and long-term disability insurance will protect your finances if the worst happens. Whether you are out of work for a month or several years, you’ll want a backup option to help you pay your rent or mortgage, car payment, grocery bills, and other day-to-day expenses that can pile up without access to consistent income. Without this insurance, many people find themselves in large amounts of credit card debt, which can be detrimental to their personal finances and credit scores.
Planning for the Unexpected: Unfortunately, none of us know what the future holds, and no one ever plans on getting in a destructive accident or receiving a cancer diagnosis. In these situations, you will want to focus on your recovery rather than asking relatives for money or depleting your bank account. Your future self will thank you for thinking of them!
Peace of Mind: By having a long-term and short-term disability plan, you can rest easy knowing that you’re covered in the case of an emergency. Unfortunately, you won’t be fully covered if you have one of these policies without the other. For example, let’s say you have a long-term policy without a short-term policy. In that case, you may be waiting between six months to a year to receive LTD benefits, and by then, you may have been evicted from your apartment or have racked up thousands of dollars in credit card debt. Even though it’s a short-term policy, it’s enough to cause long-term financial damage without it.

Conclusion

Short-term disability coverage will help you stay afloat financially for a few months after an injury, while long-term coverage can help you for several years. However, you may have to wait several months before getting long-term benefits, which is where short-term benefits come into play. With both insurance policies fitting together, you’ll be completely covered if you ever have a debilitating illness or injury.

If you want to learn more about your long-term and short-term disability insurance options, contact us today! We’re happy to answer any questions, and we’ll be with you every step of the way.

Frequently Asked Questions

How does SSDI and LTD work together?

If you are receiving long-term disability benefits and then get Social Security Disability Insurance, your LTD amount will be reduced by the SSDI amount you receive.

Which is more important, short-term or long-term disability?

Both short-term and long-term disability are extremely important, and they work together to ensure you have comprehensive disability coverage.

Can you collect Social Security Disability and short-term disability at the same time?

Yes, you can receive SSDI and STD benefits at the same time. However, your short-term disability benefit will typically be reduced by the amount of SSDI benefits you are awarded.

What is the difference between LTD and STD?

Short-term disability insurance gives you an income source in case of a temporary, short-term illness or injury. On the other hand, long-term disability benefits replace part of your income if you are ever diagnosed with a chronic disease or experience a long-term injury.