Short Term vs. Long Term Disability Insurance: Everything to Know

People are more likely to insure valuable assets such as cars, homes, and their health. However, not all people insure what is essential for survival - making a living by working. A disability insurance plan, in addition to a regular term insurance policy, is an essential type of insurance that people should consider to ensure their overall protection. Moreover, life is unpredictable, so it is necessary to plan for financial emergencies. Permanent disability insurance or accidental disability insurance can replace some of your income if you are unable to return home from a severe illness or injury.

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Let us understand short-term vs long-term disability insurance in detail in this article. 

Short Term vs. Long Term Disability Insurance

Disability insurance can also be called disability income insurance as it is designed in a way that replaces a part of your income in case of disability. Disability can be categorized as short term (temporary disability) or long term (permanent disability) and hence the insurance to cover these are also categorized into two types. Here is the basic difference between the two:

  1. Short Term Disability Insurance

    As per its name, short-term disability insurance covers you for a specific time in case of temporary disability. Similar to the policy, the benefits are limited to a maximum two-year period.

    You can continue receiving benefits from this disability insurance policy until your coverage is exhausted or fully recovered. The short-term insurance policy for disability in India generally covers injuries due to an accident or long-term illnesses. However, these can be recovered after a certain period.

  2. Long-Term Disability Insurance

    Long-term disability insurance works in the same way as permanent disability insurance. The purpose of this insurance type is to make sure that the insured person can be eligible for benefits for as long as he/she lives, from a few years up to their entire lifetime. The waiting period, in this case, can be anywhere from weeks to months.

    In India, long-term disability insurance often covers injuries and catastrophic illnesses that can lead to the loss of a job. It protects against many medical conditions like heart disease, tissue damage, mental illness, and cancer.

What's the difference between long-term and short-term disability insurance?

Short-Term Disability Insurance

Long-Term Disability Insurance

Applicable for limited time

Applicable for several years

Waiting tenure: 0-14 days

Waiting for tenure: can vary between weeks to months

Cheaper Premiums

Expensive Premiums

Important Features of Short and Long Term Disability Insurance

Before deciding the type of disability insurance that can be suitable for you, it is advisable to understand the below-mentioned features to make an informed decision. 

  1. Guaranteed Renewable

    This feature allows you to renew your policy and receive the same benefits. The company cannot cancel it. However, your insurer can increase your premium rates if you are in the same group as other policyholders where everyone's premiums are increasing.

  2. Non-Cancellable

    Except for the fact that the policyholder has not paid the premiums, the insurer does not have the right to cancel it. The policyholder can renew the policy year after year without having to reduce its benefits.

  3. Cost of Living Adjustments (COLA)

    The COLA should increase your benefits from a disability, depending on how much you are spending. This is usually measured using the Consumer Price Index. You may need to pay more premium if you choose this feature.

  4. Return of Premium

    If you do not make any claims within the specified term period, this feature will refund a portion of your premium amount.

  5. Additional Options for Purchase

    You can purchase additional insurance at a later date if this feature is available.

  6. Coordination 0f Benefits

    Your disability will determine the benefits you receive from your insurance company. All your policies can be combined, and a target amount may also be set by the disability policy to make up the difference.

Short Term or Long Term: Which Disability Insurance is Right for You?

This is one of the common issues of many policyholders when they are trying to understand What's the difference between short-term vs. long-term benefit periods. 

As it is hard to predict when you will face an injury or illness, it can also be challenging to determine how long your job may be affected. It is, therefore, very difficult to pick the right one based on hypothetical circumstances. Short-term insurance policies are more affordable than long-term ones in terms of premium payment. 

However, the coverage and payout of the short-term policy are not long-lasting. You can almost drain your financial resources with short-term disability insurance if you have a serious illness that lasts for more than three years. You can choose to have a long-term disability plan to protect yourself from such situations in such a case. Moreover, a combination of short and long-term policies is the best option to ensure overall risk protection against disabilities.

No matter your age, an injury or illness can cause massive financial hardships. Even a temporary disability can cause serious financial stress. Safely speaking, it is advisable to have a plan that covers both short-term and long-term disability to be prepared for the unexpected.

Summing It Up

Life is unpredictable at best. A person can be healthy today and severely ill the next day. This is why insurance plans exist - to cover against such unwanted uncertainties. Apart from your standard term insurance plan, it would be wise to plan for any disability that you can face in the future. We are sure the aforementioned short-term vs. long-term disability insurance information must have enabled you to make an informed decision.

Written By: PolicyBazaar

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