Disability insurance is intended to protect workers in the event of an accidental injury or unexpected illness. Such policies pay benefits to insured employees who are unable to work because of a medical or mental impairment. Plans may offer short- or long-term disability benefits.
Short-term and long-term disability coverage may be offered by an employer or purchased through a private policy. The Canadian Pension Plan also offers some disability insurance coverage. Below is a look at the significant ways in which long-term and short-term disability insurance compare and contrast.
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An Overview of Short-Term Disability Insurance
Short-term disability insurance benefits are appropriate in situations where an employee is expected to miss a relatively brief period of employment. For example, an agricultural worker who breaks his leg and is expected to miss two months of work may seek short-term disability.
Benefits are paid only for a brief, specified period of time. Typically speaking, benefits are available for 90 to 180 days, depending on the terms of the policy. The standard policy may cover anywhere from half to 100% of an employee’s missed income. This figure is based on the claimant’s pre-disability wages and the percent is subject to the terms of the policy.
It is not unusual for a policy to include a coverage cap. For instance, a policy may cover up to 75 percent of an employee’s missed week wages for a weekly limit of $450 or more.
An Overview of Long-Term Disability Insurance
Long-term disability insurance benefits are appropriate in circumstances where an employee is likely to miss a prolonged period of employment. For example, an insured worker who suffers a stroke and is likely to miss as much as a year of work may make a claim for long-term disability benefits.
The standard policy may cover anywhere from half to three-quarters or more of an employee’s missed wages. This percentage is based on the worker’s pre-disability income. Coverage may be available for a specified number of years or until the disabled employee reaches a certain age.
Key Differences Between Short-Term and Long-Term Disability
Waiting periods (or elimination periods) are one of the most significant differences between long-term and short-term disability insurance. Most short-term disability benefits are available almost immediately after injury or illness. That said, an employee might be required to exhaust his or her sick days before claiming disability pay.
However, long-term disability plans typically call for a waiting period of one or more months after the onset of disability. The claimant will not qualify for benefits until this period has expired. For this reason, many employees opt to carry both short-term and long-term disability insurance.
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Key Similarities Between Short-Term and Long-Term Disability Insurance
There are several similarities between short-term and long-term disability insurance, including:
- the need for medical evidence (both types of claims require confirmation of a disabling condition, but the burden of proof is typically much higher for long-term disability benefits); and
- both claims benefit from the help of a lawyer who can assist with the entire claims process, from initial filing to the appeals process.
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