What is Long Term and Short Term Disability Insurance

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This insurance is a cover that protects employees against loss of income in the event of an injury, accident, or illness which makes them unable to work. However, the policy does not cover work-related injuries since these are covered under the worker's compensation insurance.

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It ensures that employees get a percentage of their income when they are not able to work. It could last up to one year while the insured is sick.

Short-term disability insurance can be acquired as an individual package or group coverage at work, mostly the case. If the company does not offer, the employee is at liberty to contract a private insurance cover and secure one for themselves.

What Qualifies One to Collect Short-Term Disability (STD) Insurance?

Most of these covers specify terms within which the employees qualify to claim the benefits. Some could set a minimum time under which the employee needs to have served and could even suggest it to be full-time or consistent in the years of service.

Most employers require the employees to have exhausted their sick leave days before qualifying for STD. In some cases, employers may need to see a doctor's review of the disease affecting their employees.

What is Covered Under the Short-Term Disability Insurance?

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According to the Bureau of Labor Statistics, short-term disability insurance provides between 50 to 70% of the employee's income. The bureau also researched in 2019 and identified only 40% of employees had short-term disability insurance under different job titles and industries.

The research also revealed that 85% of the employers that offered the cover pay premiums in full for the employees, while 15% left employees with the burden of paying contributions.

Different insurance companies have additional terms of the offer, so the benefits received will vary. Upon expiry of the offer period, some employers will allow employees access benefits of long-term disability insurance.

What about Long-Term Disability Insurance?

Long-term disability (LTD) insurance is a plan that covers employees or self-employed individuals against the loss of income due to injuries or sickness, causing them to miss work. The cover protects employees for a longer period.

Like the STD, long-term disability insurance does not cover work-related injuries covered under the worker’s compensation insurance. The long term cover ensures employees a certain percentage of their income at the time of the event.

Importance of Long-Term Disability Insurance

Mostly when looking for jobs, employees get to pick jobs that have a competitive package of benefits. In this case, employers that want the best employees in the market need to offer a competitive disability package like LTD.

The cover’s premiums are mostly paid for by the employer since it is costly to acquire as an individual. If the employer does not provide coverage, they mainly consult a long-term disability insurance company to offer the cover to its interested employees individually at a discount.

Another better fact about this cover is that payments to employees from an employer's purchased plan are taxable, while gains from an employee purchase plan are not.

The disability insurance cover is a token of appreciation and respect to employees for their services.

What is Covered under the Long-Term Disability Insurance?

This insurance provides cover to the employee once the short-term disability insurance lapses. It happens if the employee is still not able to report back to work. Different long-term disability insurance offers have a defined time between two to ten years, or up to a certain age, mostly 65 years. Most people prefer the 65-year deal.

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Different long-term disability policies outline the other pre-existing conditions that would disqualify an employee for benefits.

Some LTD policies pay the disability if the employee cannot secure another job in their profession. In contrast, others expect the employees to be able to get another job.

Therefore, employees need to read through the employer's policy plan to ensure they meet their needs or consider getting one for themselves under their insurance carrier.

The Painful Truth about Both Covers

The Council for Disability Awareness did research and identified the following uncertainties:

  • There is a 51% working population in the United States that do not have a disability cover. They only rely on social security.
  • At least one in four young people in their 20's suffered a 90-days out of work period because of either injuries or sickness before retirement.
  • 5.6% of working Americans suffer a short-term disability every year. It could be because of an injury, sickness, or even pregnancy.
  • Only 48% of American adults can afford a living three months after losing their jobs. Most adults cannot even afford emergency payouts worth more than $300 without taking a loan.

Conclusion

There are still many employees who have no access to disability covers, which is sad. Both short-term and long-term disability insurance are excellent security for future income, and employers should consider providing them to their employees.

If the employers do not provide the cover, employees should find means to acquire such policies on the safer side. Employees should ensure they provide correct application information to avoid denial of benefit in case of an injury, sickness, or accident.