What Does a Short-Term Disability Claim have to do with a Long-Term Disability Claim?

When you have both short-term disability insurance and long-term disability insurance, it’s likely that if you ever do become disabled, you’ll be pursuing a claim on the short-term disability policy before filing a long-term disability claim. Even though you may only be looking for benefits for a few months at first, it is vital to take that short-term disability claim seriously and put the appropriate amount of effort into being successful on your claim. If your short-term claim is denied, it can have serious negative effects on your ability to be successful in filing a claim for long-term disability, possibly rendering you unable to obtain benefits vital to your future through a long period of disability.

What do I need to know about short-term disability insurance?

Short-term disability insurance (STDI) provides income replacement if you are disabled from working for a short period of time. Typically, STDI will pay up to 80% of your gross income for about three months, although some STDI policies pay benefits for as long as six months. STDI may be provided by your employer and either fully paid by the employer or requiring a small portion to be paid through an employee contribution. You can also purchase STDI as a private individual policy, but the premiums typically cost as much as long-term disability insurance (LTDI) and so don’t make sense for everybody.

Why do I need STDI if I already have LTDI?

LTDI has what’s known as an elimination period, which is a length of time you must be disabled before LTDI benefits kick in. Even if you are not continuously disabled at first, any days you are disabled will be counted toward the elimination period, so long as they occur within a set period of time, known in your policy as the accumulation period. In layman’s terms, you can think of this time as a “waiting period,” although the precise terminology used by the insurance company in your policy is highly complex and technical.

The elimination period differs from one LTDI policy to another. Typically, the elimination period will be 90 days in most policies, although it could be 180 or even 360 days. The elimination period is obviously a very important aspect of your LTDI coverage and should be well-understood at the time you are purchasing the policy. By purchasing the appropriate amount of STDI coverage in relation to your LTDI elimination period, you may be able to receive benefits for the entire period of your disability.

Are there negatives to purchasing short-term disability insurance?

If your employer offers STDI at no or low cost to you, you may think, why not take advantage of this benefit? Keep in mind that if your employer purchases short-term disability insurance, it is most likely to come from the same company that is providing your LTDI policy. This scenario provides a couple of negatives to the employee. First, the insurer is more likely to closely scrutinize your STDI claim, knowing that an LTDI claim may be on the horizon. Secondly, even if the carrier does approve your claim and pay STDI benefits, they can spend their time during the short-term claim period building their case to deny a more expensive long-term claim they know may be coming. All of the documents you provide, including medical records and doctor’s reports, regarding your STDI claim can end up being used against you when you apply for LTDI. This is another reason why it’s important to get legal help with an STDI claim – not only to help you be successful in gaining short-term disability benefits, but also to keep you from damaging a future long-term disability claim based on your medical records and documentation.

Should you purchase your own STDI, regardless of whether your employer offers LTDI or not?

Affordability is one key issue here. STDI costs just as much as LTDI, which can be cheap or not so cheap depending on your age and income bracket. Weigh the costs of the premium against how important it would be for you to have steady income during the elimination period of your LTDI policy. Another option, if you have the will to follow through, is to set aside a few months’ worth of salary in a separate savings account in the event of short-term disability, and only buy insurance to cover a long-term disability. If you simply can’t save without finding other reasons to spend that money, an STDI policy may be in your interest.