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Types of Disability Insurance

Author: Michael Relvas

There are two types of Disability insurance a person can have: Long-Term disability and Short-Term disability. Depending on your work situation, you may be eligible for both types of coverage through your employer in the form of a group plan. For those who are not provided these benefits at work, you are able to obtain both Short and Long-Term coverage directly through an insurance company on an individual basis.

Individual Disability insurance must be applied for. The application process is fairly uniform amongst the various insurance companies and will traditionally require the applicant to complete a paper/electronic application, an insurance medical exam, a phone interview and provide tax returns as proof of income. Without getting too far into the details of this process, you can expect that obtaining a policy will take anywhere from 3-8 weeks on average.

The big dilemma that many people will face is whether to obtain Short-Term or Long-Term disability. Solely based on the potential loss of a Long-Term claim vs. a Short-Term claim, it certainly makes more sense to have Long-Term protection, but it is often not that simple. In order to clarify this issue, consider what each is truly protecting.

Traditionally, a Short-Term disability policy will be designed with a 7-14 day waiting period and 3-6 month benefit period. This means that benefits will become payable after 7-14 days of being disabled, and will continue to be paid for up to 3-6 months for any one illness or injury. In most situations, Short-Term coverage is intended to pay benefits during the waiting period of a Long-Term disability policy, but terminate once the Long-Term benefits become payable. It can be described as an insurance that provides you with sick leave. Being that Short-Term disability insurance pays for relatively short benefit periods, it is protection against a simple type of injury or sickness, but not something major.

A Long-Term disability policy will usually be designed to begin paying benefits after 90-days of being disabled and will continue paying benefits for 5-years, 10-years or until retirement age, depending on which benefit period you choose. Long-Term disability is the type of coverage that can truly save a person from facing a complete financial disaster. We live our lives expecting and assuming that our ability to work and earn an income will never cease. Without that ability to continue earning an income however, we are no longer able to support our lifestyles and financial responsibilities.

To clarify: assume a person has $5,000 of monthly benefit on his/her Short-Term and Long-Term disability policy. If this person incurs a Short-Term claim of 5 months, assuming a 14-day waiting period, he/she will be eligible for a total of $22,500 over the 5-month claim. Although this is a substantial amount of money and not having it can certainly create financial hardship, this is probably not sufficient to cause a bankruptcy or foreclosure. If this person incurs a longer claim of 4-years, the total benefit paid would be $240,000. Clearly, with Long-Term disability insurance you are protecting a much larger risk. A loss of $240,000 is much more likely to cause bankruptcies, foreclosures and a severe financial disaster than a loss of $22,500.

Both Short-Term and Long-Term disability policies can be custom designed to your situation and budget. It is important that when you consider obtaining individual coverage you work with a specialist who can truly assist you in finding the best fit for you.

Michael Relvas is an insurance consultant with MR Insurance Consultants, a web-based insurance firm that provides interested consumers with personalized information, quotes and advice regarding Disability insurance. Should you have any questions or interest in discussing options available for you, please feel free to call 1-800-817-4522 or email

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