Short-Term and Long-Term Disability Insurance — What's the Difference?

Your greatest asset may be your ability to earn an income. After all, a lifetime of income can easily be well into the millions of dollars. That’s why it’s smart to protect that asset with disability insurance. If you’re ever injured or too sick to work for an extended period of time, disability insurance can help you make up lost income. 

When researching disability insurance, you may find that it comes in two primary forms: short-term disability insurance and long-term disability insurance. What’s the difference between the two, and which one should you get? 

The short answer is that short-term disability insurance and long-term disability insurance can work together if you’re ever disabled for an extended period of time. 

The difference between short-term and long-term disability insurance 

Just like it sounds, short-term disability insurance covers you for a short period, usually for the first three to six months of a disability. Long-term disability insurance, on the other hand, picks up after a certain amount of time has passed (usually three to six months). That’s why it’s typically best to have both short-term and long-term disability insurance. 

What to know about short-term disability insurance 

While it’s possible to get private short-term disability insurance, this is usually something that’s offered through your employer’s benefit package. Depending on your employer’s offering, short-term disability insurance cost may be covered entirely though your benefits package, or you may choose to add coverage for an additional cost. Some employers allow you to use short-term disability insurance during a maternity leave. Short-term disability insurance is also commonly used for recovery from surgery, illnesses that require frequent treatment or injuries. 

What to know about long-term disability insurance

If an injury or illness leaves you unable to work for a longer period of time, long-term disability insurance helps to make up lost income. Depending on your policy, after the initial waiting period, long-term disability insurance will typically send a monthly benefit that lasts as long as your disability (up to a certain point — typically, as long as you continue to be disabled, your benefit will last until you reach a certain age, like 65 or 67).

Where do I get long-term disability insurance?

Many employers offer long-term disability insurance as part of a benefits package. However, it’s a good idea to pay attention to what you’re actually offered; Employer plans offer a benefit that will cover a percentage of your salary – usually up to 60 percent. It will not cover 100 percent of your salary, and you’ll have to pay tax on that benefit.

That’s why many people choose to supplement their employer’s coverage with a private long-term disability insurance policy.

Long-term disability insurance usually has a waiting period of about three months after your disability begins. After the waiting period, your long-term insurance policy would begin to pay a benefit for a qualifying disability.          

Like short-term disability insurance, long-term disability insurance policies usually cover only a portion of your salary.  The monthly benefit amount that may be payable will depend on the terms and conditions of your policy as well as the extent of your injury or illness.

Should I get short- or long-term disability insurance? 

By now you know the answer to the question is both, though your unique situation will guide which policy is best for you. Consider working with a financial advisor to review your situation and recommend the best fit for your needs. 

To be used with form MN 992-STD, MN 992-LTD, MN 1096 SGSTD, MN 1096 SGLTD, ICC16.TT.DI.IIB.(0916), ICC16.TT.DI.FIB.(0916), ICC16.TT.DI.CAT.(0916), ICC16.TT.NCDI.(0916), ICC16.TT.GRDI.(0916), ICC16.TT.DI.PDB.(0916), ICC16.TT.DI.PDBO.(0916) or state equivalent. Not all contracts and optional benefits are available in all states. Disability insurance policies contain some features and benefits that may not be available in all states. The ability to perform the substantial and material duties of your occupation is only one of the factors that determine eligibility for disability benefits. These policies also contain exclusions, limitations and reduction-of-benefits provisions. Eligibility for disability income insurance, additional policy benefits, and qualification for benefits, is determined on a case-by-case basis. For costs and complete details of coverage, contact your Northwestern Mutual Financial Representative or your group plan administrator.  

Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) (life insurance, disability insurance, annuities, and life insurance with long-term care benefits) 

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