To state the obvious, some workplaces are safer than others. Construction workers face more risk of injury than accountants, and car salesmen probably don’t have to be as concerned with safety as airline pilots.

Tragically, though, approximately 150 workers a day die on the job, and between 7.4 million and 11.1 million worker injuries occur annually in the United States. One out of four employees will suffer a disabling injury before they retire. Even about 25% of today's 20 year olds have a chance of becoming disabled at some point in their career before retirement.

These disabling injuries are the reason most employers offer disability insurance. Sometimes referred to as disability income insurance, it provides monetary benefits to employees who can’t work because they’re sick or injured. Some of the most common reasons for disability claims include pregnancy, mental health issues and cancer.

Short- and long-term disability are the two major types of policies offered in the U.S., with the main differences being the length of the benefit periods and level of coverage. Unlike workers’ compensation insurance, which covers injuries that occur on the job, disability insurance is utilized for those that happen outside the workplace.

Disability insurance also is not part of State Disability Insurance (SDI), a public benefit program that helps people who become disabled for up to a year. Nor is it the same as Social Security Disability Insurance (SSDI), which is disability coverage available to U.S. residents with severe health conditions who either haven’t worked or accrued enough work credits.

It’s typically easier for individuals to receive approval for long-term disability benefits than it is for SSDI. In fact, the average SSDI claim can take five months to get approval.

All disability policies vary in the kinds of waiting periods and disabilities covered, benefit rates and exceptions. Depending on whether a policy was funded with pre- or after-tax dollars, disability income might or might not be subject to income tax.

Most employees don’t contribute to their short- or long-term disability plan – only 18% are required to contribute to short-term disability and 6% to long-term insurance. Workers in service occupations have the lowest access rates for both short- and long-term disability insurance.

Summary of short-term disability insurance

Short-term disability provides some level of income to employees if their employer offers such a policy. The median length of short-term disability insurance coverage is 26 weeks, and it replaces all or part of a person’s income due to temporary disabilities.

The median salary replacement rate for short-term disability plans is 60%, but this type of insurance doesn’t provide an employee with job protection. Short-term disability insurance can be purchased independently by an employee and, depending on the policy level and premium, offers a range of partial to full income coverage.

Coverage from short-term disability insurance usually starts anywhere from 1-14 days after an employee suffers a condition that leaves him or her unable to work. Most states require employees to use all their sick and personal days before short-term disability benefits begin. Each state sets its own requirements for whether or not employers have to offer short-term disability insurance and what the mandated limits of basic coverage amounts are.

Employees who utilize short-term disability insurance are required to return to work as soon as their health care provider permits, and employers can require documentation from that provider to prove the employee’s illness or injury.

Approximately 75% of employees have a short-term disability policy that includes a maximum benefit amount. More than 90% of private industry workers are covered by a fixed-duration plan, while access to short-term disability ranges from 20% for service workers to 54% for workers in management, professional and related occupations.

Learning about long-term disability insurance

A majority but not all of employers provide long-term disability plans that correspond with their short-term policies. This allows long-term disability policy benefits to begin when the short-term ones end. Most employers pay the full premium for long-term disability plans, although most policies include a waiting period that lasts anywhere from three to 26 weeks.

Like short-term disability insurance, long-term disability does not give an employee job protection. The benefits may continue through the individual's normal retirement date or until he or she becomes eligible for Social Security disability benefits.

The median amount covered by long-term plans is 60% of annual earnings, and long-term disability incidents last an average of 34.6 months. About half of large and mid-sized employers and more than 7 out of 10 organizations (72 percent) offer long-term disability insurance to their employees. Access rates for long-term disability ranges from 10% for service workers to 59% for management, professional and related occupations.

At MLS, our services enable our clients to procure an independent and objective opinion of a claimant's functionality, prognosis, impairment, treatment, maximum medical improvement, pre-injury status and employability for insurance carriers, third-party administrators, employers and risk managers. Our IME and peer disability reviews focus on the employee’s ability to return to work based on medical evidence.

Contact us to schedule a demo and learn more about MLS services.

Differences Between Short- and Long-Term Disability Insurance