Comparing the Income Replacement Feature in Short Term Disability (STD) to the Benefits in a Long Term Disability (LTD) Policy
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Comparing the Income Replacement Feature in Short Term Disability (STD) to the Benefits in a Long Term Disability (LTD) Policy
Income benefits may or may not be comparable in short term disability when compared with long term disability insurance. Typically the best situation for you is that your short term disability income replicates your benefits from a long term disability policy. There are sometimes differences in benefits for the following reasons.
Much of the short term disability coverage provided is offered by employers and federal or state government. Long term disability coverage is often secured by individuals. The choices of income benefit levels can be quite different.
For example, your employer-sponsored, state, or federal short term disability insurance may provide income replacement up to 60% of your regular monthly compensation. You may purchase individual long term disability insurance that provides benefits at 70% to 75% of your regular income. This is not necessarily a bad situation, but it does create a benefit mismatch.
Short term disability programs sometimes provide lower income benefits because much of this coverage is provided by employer-sponsored group plans and/or government backed programs. Because of the more universal nature of their coverage, they must concentrate on the majority of the group, not the individual. If you purchase individual short term disability coverage, you'll have the opportunity to enhance your benefits, which might be an important factor for you.
Refer to your insurance policy contract for specific information regarding your coverage and for actual terms, conditions and exclusions. The above statements are general in nature and may or may not reflect the actual terms of your insurance policy.
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