Difference between Long Term Disability and Short Term Disability
Disability insurance is a crucial component of financial security, providing a safety net for individuals who are unable to work due to illness or injury. However, there are two primary types of disability insurance: long term disability (LTD) and short term disability (STD). Understanding the difference between these two types is essential for making informed decisions about your financial protection.
Short Term Disability (STD)
Short term disability insurance is designed to cover an individual’s income for a limited period, typically ranging from a few weeks to a year. It is intended to provide financial support during the initial recovery period after an injury or illness. STD policies often have a waiting period, which can vary from 0 to 14 days, followed by a benefit period that ranges from 13 to 52 weeks.
The eligibility criteria for STD are usually more lenient than those for long term disability. To qualify for STD benefits, an individual must meet the policy’s requirements, which typically include being unable to perform their regular job duties due to a covered condition. STD benefits are usually a percentage of the individual’s pre-disability income, often around 60% to 70%.
Long Term Disability (LTD)
Long term disability insurance is designed to provide ongoing financial support for individuals who are unable to work for an extended period, typically more than a year. LTD policies often have a longer waiting period, ranging from 90 to 180 days, followed by a benefit period that can last until the individual reaches the age of 65 or 67.
Eligibility for LTD benefits is typically more stringent than that for STD. To qualify for LTD, an individual must meet the policy’s requirements, which often include being unable to perform any job for which they are reasonably suited, not just their regular job duties. LTD benefits are also usually a percentage of the individual’s pre-disability income, but the percentage may be lower than that of STD benefits.
Key Differences
The primary differences between long term disability and short term disability can be summarized as follows:
1. Duration of Coverage: STD covers a shorter period, typically a few weeks to a year, while LTD covers an extended period, often more than a year.
2. Waiting Period: STD has a shorter waiting period, usually ranging from 0 to 14 days, while LTD has a longer waiting period, typically 90 to 180 days.
3. Eligibility: STD is generally easier to qualify for, as it requires the individual to be unable to perform their regular job duties. LTD is more stringent, requiring the individual to be unable to perform any job for which they are reasonably suited.
4. Benefit Percentage: STD benefits are usually a higher percentage of pre-disability income (60% to 70%), while LTD benefits are typically a lower percentage (around 40% to 60%).
Understanding the difference between long term disability and short term disability is crucial for individuals seeking to protect their financial well-being. By choosing the right type of coverage, individuals can ensure they have the necessary support during their time of need.
