The U.S. Census Bureau estimates that an American worker has a one in five chance of becoming disabled. The average long-term disability absence from work lasts 2.5 years, according to the Council for Disability Awareness. That’s a long time to survive without a salary.
If illness or injury unrelated to your job left you incapacitated, Long-Term Disability (LTD) insurance can provide an ongoing source of tax-free income for you and your family for anywhere from two to five years, or until you turn 65. If you’re “partially disabled” — meaning you can still work, but only in a job that pays less than 20% of what you previously made — you’ll probably get full disability benefits based on your pre-disability income.
However, LTD coverage usually has a waiting period of anywhere from two weeks to a couple of months before you can start collecting. In the meantime, how would you meet the expenses of daily living? Although sick days and full-paid leave (if your employer offers it) would provide some income, chances are that you will not meet the Social Security Disability eligibility requirement — an estimated inability to perform gainful employment for at least 12 months.
The solution: Short-Term Disability (STD) insurance can replace between 50% and 70% of your income for a period of three months to two years. The waiting period can vary from a single day (in case of injury) to as long as 14 days, if your disability results from an illness that will need time to diagnose. Bear in mind that an STD policy usually costs less than LTD coverage because benefits are paid for a shorter period of time.
Which of the two is better for you? We’d be happy to offer our professional advice.