Short-Term DI Vs. Long-Term DIJulie Brooks
Short-term disability insurance and long-term disability insurance are both designed to provide replacement income to your clients, in the event they are unable to work due to accidents or sickness. The most obvious difference between the policies is the amount of time they are designed to sustain your clients’ incomes.
A short-term policy will pay benefits for a select period up to a maximum of two years; a long-term policy will pay benefits for a select period of a minimum two years, and up to age 65 or even age 70.
Let’s take a further look at the advantages to both policies.
Advantages of Short-Term DI:
Short-term disability insurance pays benefits after a pre-determined elimination period (the number of calendar days after a disabling injury or illness, before the disability insurance policy would begin to pay benefits) has been met.
Short-term disability insurance lasts for a shorter, specified period and typically a shorter elimination period or “waiting period” before benefits become payable. The average elimination period is 7 to 30 days. This type of insurance policy is useful for major, but relatively brief disabilities such as those suffered from accidents or non-terminal sickness.
Also available is a very affordable short-term disability plan that only covers accidents. These are popular with younger, blue collar workers worried about getting hurt (either on or off the job). The premium is more affordable, as it does not cover sickness – so this should be offered to clients who aren’t as concerned about getting sick, but are more concerned about getting hurt or having an accident.
In many instances, short-term disability insurance is only a portion of how clients protect their income in a situation where they cannot work. They may also use their emergency savings, workers’ compensation, paid leave and other forms of insurance in conjunction with short-term disability. But, when these benefits are exhausted (or if they never had them in the first place), short-term disability can provide critically important funds.
Advantages of Long-Term DI:
In the case of a long-term absence from work, a combination of short-term disability insurance benefits and other savings may not be enough to financially sustain your clients and their families. This could leave them vulnerable to financial burdens, such as mortgage foreclosures or default on debt.
A long-term disability insurance policy can help protect your clients and their families from scenarios like mortgage foreclosure and bankruptcy. These insurance policies are typically more comprehensive, offering long-term benefits that will protect your clients in the event of accidents and sickness. There are also additional rider options available such as a Cost of Living Adjustment, Partial Disability Benefits, and Benefit Increase Riders. The additional options for a long-term policy allow you to tailor coverage to meet your clients’ unique needs.
The benefit period on these policies ranges from two years, or until age 65 or 70, and often have a longer elimination period such as 90 to 180 days. Because your state may have different regulations governing the length and availability of long-term (and short-term) disability insurance, please contact us for plan availability.
How can you get started on designing the right plan for your clients? Asking the right questions is always a good start:
- How long would they be able to meet their monthly expenses if they were unable to work for a period of time?
- How much of their savings would be available?
- Does their employer offer an income protection plan?
- What are their occupations and annual reported incomes?
For more information about short-term and long-term disability insurance, contact your Insurance Advisors Sales Rep.