June 21, 2024

    Short and Long Term Disability Insurance for Individuals

    Disability insurance for individuals is a great safety net for ensuring workers are taken care of in the event of illness or injury. Yet only about 40 percent of U.S. employers offer short-term disability, and 35 percent offer long-term coverage. This may be in part due to a lack of understanding about how such policies work and when they kick in.

    If you are an employee searching for a new job or a business looking to hire, there are many good reasons to have disability coverage. The information below will tell you everything you need to know about short- and long-term plans, and how they can benefit you and your employees.

    What Is Disability Insurance?

    A recent study showed a disparity between who needs disability insurance and who thinks they need it. While almost half of all workers in the country will use disability insurance at some point, a much smaller percentage believe they will.

    Disability insurance for individuals is a particular kind of insurance that protects you if you are unable to work. It provides a predetermined amount of a person’s wages or salary. To become eligible, the reason for not working must be due to illness or injury.

    This is distinct from workers’ compensation benefits, which cover injury or illness that happens as a direct result of work functions. Disability insurance kicks in even if the illness or injury has nothing to do with work. While there are some exceptions, in most cases an employee cannot qualify for both types of compensation.

    Employer-sponsored plans are the most common type of coverage. But individuals can buy private disability insurance, should their employer not offer it.

    Private plans also can be a good supplement to employer plans. For instance, this disability insurance for nurses offers plans for a specific type of employee. Such plans can be a useful boon regardless of your coverage status.

    Note that, while disability insurance is an obvious aid to employees, employers benefit as well. It ensures financial security for your employee while they recover and can be a vital tool for getting them back to work. It also is a great benefit to help you attract the best employees. 

    Short- vs. Long-Term Disability

    Each disability insurance plan has a set period of coverage. Short-term disability insurance refers to benefits that last between three months and a year. Long-term disability insurance refers to plans designed for lengthier periods, anywhere from two years to the rest of your life.

    There is often a waiting period, usually between three and six months, for long-term disability to kick in. The idea is to determine if the illness or injury will demand a longer period of inability to work. Also, if you have a short-term disability as well, this should cover you during this time.

    Disability insurance plans pay out different percentages as well, whatever is specified in the policy. Short-term plans will have a benefit of 40 to 70 percent of your lost wages. Long-term plans will likely be in the range of 60 to 80 percent of what you earned.

    The average disability insurance cost is around 1 to 3 percent of an employee’s pre-tax salary. Many employers cover the full amount of premiums, while others ask employees to share in the cost.

    Learn More About Disability Insurance for Individuals

    Now that you understand the different types of disability insurance for individuals, you can have clear expectations of how you would be compensated should the unforeseeable happen.

    We hope you found this information on types of disability insurance helpful. If so, be sure to take a look at some of our other lifestyle posts, as well as those on business, finance, health, real estate, and many other topics.


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