Disability Insurance Benefits – Short-Term vs. Long-Term
Disability insurance is supposed to replace the income that cannot be earned for a period of time due to a qualifying disability. Qualifying disabilities are non-work-related injuries or illnesses that render a person unable to perform their job or perhaps any job.
The primary difference between short-term and long-term disability coverage is at what point the coverage begins and how long it lasts. Short-term disability coverage is more likely to be provided by an employer. Employees often have the option to purchase either short or long-term disability coverage through their employer at a discounted rate. Individual policies are also available.
Whether a disability is short-term or long-term, disability benefits can be critical when an employee is unable to work. At Dawson & Rosenthal, we understand how frustrating it can be to become disabled and then have your disability benefits denied. Our disability insurance bad faith lawyers have over 30 years of experience helping clients in California and Arizona get the insurance benefits they have a right to.
Short-Term Disability Insurance
Short-term disability insurance has a short waiting period before benefits begin being paid and typically lasts for several months up to 1 year. Short-term disability insurance differs from workers’ compensation insurance because the cause of the disability does not need to be work-related.
- most common short-term disability – pregnancy
- amount of payments – up to 80% of your monthly gross income
- waiting period – usually 1 to 2 weeks
- duration of benefits – typically 3, 6 or 12 months
California is one of five states that require employers to offer short-term disability benefits to employees.
Long-Term Disability Insurance
Long-term disability insurance requires a much longer waiting period and benefits are payable over a much longer period. The coverage is not intended to replace income lost from shorter-term disabilities.
- most common long-term disability – musculoskeletal disorders (back, knees, hips, shoulders)
- amount of payments – the average amount is 60% of your monthly gross income
- waiting period – usually 90 days but can be longer
- duration of benefits – commonly 2, 5, or 10 years or until retirement
The Cost of Disability Insurance
The cost of disability insurance is related to the benefit amounts that will be payable. Premiums tend to be lower through employer plans but the coverage may not be as broad as what is available with an individual policy. Premiums are usually somewhere between 1-3% of gross income for both short and long-term disability insurance.
Are Short and Long-Term Disability Benefits Taxable?
Whether disability benefits are taxable depends on the tax status of the money used to pay the premiums. If the premiums were paid with pre-tax dollars, the benefits are taxable. If the premiums were paid with after-tax dollars (usually the case when individual policies are purchased), the benefits are not taxed.
Where to Go for Help When Your Disability Benefits are Denied
The likelihood of experiencing some type of disability that prevents you from working for at least 1 year between age 20 and normal retirement age is about 25%. Yet most Americans don’t have enough savings to even cover 3 months of their recurring expenses. Those who have short and/or long-term disability insurance rely on those payments to keep themselves and their families going during their disability period.
When insurance companies wrongfully deny disability benefits it creates additional hardships on families that may already be struggling to deal with the disability. The disability claim denial lawyers at Dawson & Rosenthal understand how important those benefits are to you and your family. We know how to persuade insurance companies to pay our clients the benefits they are legally entitled to.