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The differences between short- and long-term disability policies

Many employers offer disability insurance as part of their sponsored insurance program. Workers may feel confused about the fact that there are both short-term disability policies, as well as long-term disability policies. Do people really need both? How do they differ? These are common questions, and understanding the answers can help you appreciate the value of both forms of insurance.

Long-term disability and short-term disability usually have different terms, different rates of wage replacement and offer non-overlapping protection. You could find yourself fully dependent on your disability insurance policy for income and even medical coverage after an accident or sudden medical event.

Thankfully, if these are products offered by your employer, they are likely regulated under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA guidelines establish how claims get processed and help ensure people have a chance to appeal after a denial of benefits. You can rely on the ability to file a claim if you ever find yourself in need.

Short-term disability covers you after an injury or incident

There are all kinds of situations that can lead to a need for short-term disability. Medical incidents, like strokes, heart attacks, embolisms and even serious infections could leave you hospitalized or otherwise unable to work in the near future. When that happens, your short-term disability plan covers a portion of your lost wages to provide you with financial stability until you recover.

Short-term disability plans cover injuries and illnesses, even when they are unrelated to work. That's why many people choose to maintain private, employer-sponsored short-term disability insurance instead of hoping that workers' compensation will be enough to provide after any injuries. Typically, short-term disability coverage lasts anywhere from three to six months.

Long-term disability protects those unable to return to work

Sometimes, injuries, medical events or illnesses have a profound and lasting impact on a person's mobility, cognition or well-being. When that happens, the injured party may not be able to return to work. That could leave an entire family without an adequate and reliable source of income. That's where long-term disability coverage comes in.

Long-term disability insurance typically covers a portion of your wages for a specified period of time. It could be a limited number of years, such as 10, or it could be until the person making the claim reaches a certain age, like 65. Coverage would also end if the claimant regains the ability to work after treatment, therapy or time in recovery. Although receiving roughly 50-60 percent of your wages will require substantial adjustments to how you live, these payments can help ensure bills, rent or mortgages and other necessities are paid.

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