Long term vs. short term disability insurance

The biggest difference between short term and long term disability insurance is the period of time you’ll receive benefits if you’re unable to work. This period is called the benefit period.

As the name indicates, short term disability insurance is intended to cover you for a short period of time following an illness or injury that keeps you out of work. While policies vary, short term disability insurance typically covers you for a term somewhere between 13-26 weeks and can replace anywhere from 40-70% of your income during that benefit period.

On the other hand, long term disability is intended to provide benefits for a longer period, and benefit periods for long term disability insurance are usually stated in years: 5, 10, 20, or even until you reach retirement age, depending on your plan.

If you have both short term and long term disability policies in place, short term disability will pay you benefits during the waiting period before your long term disability coverage begins, at which point you’ll transition from one policy to the next to receive benefits.

How much does long term disability insurance cost?

The cost of a disability policy – especially an individual policy – can vary greatly based on benefit length and amount, age, gender, occupation, and policy riders. One rule of thumb: expect to pay between 1 to 3 percent of your annual salary.

Premiums – the amount you (or your employer) pay for the policy – can be in the range of $25 to $500, again depending on many factors particular to your situation. The benefit of an individual policy usually isn’t taxed (unless paid for with pre-tax dollars); for a group plan if paid in part by your employer, the benefit will be taxable.

The long answer is more complicated. We’ll explain below so you better understand what you’re buying.

Learn more about cost with our disability income insurance quote tool.

Factors that determine long-term disability costs

Premiums vary based on the length and type of coverage, your health, the benefit amount, and other factors. In this section, we’ll highlight how these factors may determine costs.

  • Age: The earlier you buy disability insurance, the lower your premium rates will be. That’s because as you age, your health declines and you become more likely to suffer a disability or illness. You can, however, lock in the rates for life when you purchase disability insurance when you’re healthy.
  • Gender: Men pay less than women for disability insurance, because more women file claims for pregnancy and mental health conditions. However, disability insurance rates increase at a faster rate for men than for women, with men paying about 50% higher rates at age 40 and 191% higher rates at age 60 than they would at age 24.1
  • Occupation: Hazardous occupations, such as working with heavy equipment, might pay more than someone who sits at a desk all day. 
  • Health: Your health also affects cost, as people with a history of disabling conditions such as back injuries, arthritis, and asthma could potentially pay higher premiums. 

And optional factors that vary by person 

  • Coverage amount: The amount you receive each month when you can’t work. It should be between 60 to 80 percent of your monthly salary. The benefit of an individual policy usually isn’t taxed (unless paid for with pre-tax dollars); for a group plan if paid in part by your employer, the benefit will be taxable.
  • Benefit period: The length of time you can receive benefits. For short term disability this will typically not be more than a year; for long term disability it could range from two years to retirement, or until you recover from your disability.
  • Waiting period: Also called an elimination period, it’s the amount of time after you are disabled until you can start receiving benefits. It will generally be shorter for STD and longer for LTD.

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Standard individual disability plan features offered by Guardian

  • Non-cancelable: To make sure your rates stay the same as you age and become less healthy, you need to lock in your rates. You can do this by purchasing a non-cancelable rider, which guarantees your rates on the policy as long as you keep paying the premiums.
  • True-Own Occupation definition of total disability: Provides you the ability to receive your full disability benefits, even if you’re gainfully employed in another occupation or capacity – with no reduction in benefits. Other optional definitions are available. Different levels of disability may also be defined, (for example, “partial disability”) which can qualify you for various percentages of your total benefit amount.
  • Waiver of premium: Waiver of premium for disability is a provision in an insurance policy that states the insurance company will not require the insured to pay the premium if they are disabled and receiving benefits.
  • Hospice care benefit: If you’re admitted into a qualified hospice program, you’ll be considered totally disabled (eligible for benefits) and in many cases, the policy elimination period will be waived so you can receive benefits sooner. 
  • Unemployment premium suspension: Suspends premiums while you’re unemployed, allowing you to stop paying premiums but continue owning the policy. However, coverage is also suspended while you’re unemployed, so if you become disabled during that time, you won’t receive a benefit.
  • Occupational rehabilitation and modification and access benefit endorsement: Helps pay for occupational rehabilitation expenses plus the cost of modification to your work environment to accommodate physical limitations. 

Optional individual disability plan riders

  • Future purchase option2: This lets you increase coverage in the future as your income rises, without having to undergo a medical exam or provide proof of medical insurability.
  • Cost-of-living adjustment3 (COLA): A policy rider that states the insurance company will increase your benefit to account for inflation.
  • Catastrophic disability benefits: Provides extra funds – up to 100% income replacement – if due to injury or sickness you are unable to perform two or more activities of daily living, are cognitively impaired or irrecoverably
  • Student loan protection rider4: This optional benefit provides extra money to make student loan payments during the benefit period. It is particularly useful for early-career professionals such as doctors and lawyers who have invested heavily in their education.
  • Retirement protection5: A rider that protects retirement savings by replacing the contributions you would have made to your defined contribution plan while totally disabled.
  • Unemployment waiver of premium: Waives your premiums while you’re unemployed, allowing you to stop paying premiums but continue owning the policy. You may remain eligible for disability benefits should you become disabled during that time, since your policy remains active. 
  • Social insurance substitute: This monthly benefit coordinates with payments received under Social Security and some other government programs.

Where to get long term disability insurance

There are two potential  ways to get a disability insurance policy:

  1. Group disability insurance through your work or an association.

Your company may offer STD or LTD insurance as part of your employee benefit package. If you’re self-employed you may be able to get disability insurance through a professional association. Either way, group disability insurance can be an excellent choice: Because the company or association is buying for a large group of people, the premium is typically lower than for an individual policy. In addition, your HR department (or the association’s management) will likely have more expertise and leverage to negotiate favorable terms.

An added benefit to getting a policy through your employer is that they may also subsidize a portion of the premiums, further lowering your cost. On the other hand, because the company or association is effectively “buying in bulk,” you will probably have less opportunity to tailor the policy to your needs. If the premiums are paid with pre-tax dollars (usually the case with employee benefits) then the income benefit you get down the road will typically be taxed. Finally, if you leave the company or association, in most cases you’ll also lose your coverage.

  1. Individual disability insurance

This is typically a long term disability policy you purchase for yourself, so you can tailor it to your needs. As it’s usually paid for with after-tax dollars, the replacement income it provides is also tax-free. It’s most often bought through a financial professional; if you don’t have one, or if that person doesn’t have much experience with disability insurance, a Guardian financial professional can give you a disability insurance quote.

Curious about the role of disability insurance in financial wellness? Learn more


Can the cost of individual disability insurance rise as your earnings grow?

A graded premium policy lets you pay a lower amount initially, with increases according to a pre-determined, guaranteed schedule.  You may also have the option to convert to a “level” premium.  Level premium is a fixed premium that never increases. 

Should I buy individual disability insurance in addition to the group plan offered by my employer?

If you are looking for more protection, you should consider adding extra coverage on top of your group long term or individual disability plan.Supplemental disability insurance available through an employer can be a great add-on for employees and individuals who wish to protect a greater percentage of their income, bonuses or commissions.

Supplemental disability insurance helps cover the difference between what you’ll receive from your current group long-term disability policy and what you’d need to maintain your current lifestyle if you’re unable to work due to injury or illness.

How much does long-term disability insurance cost per month?

The cost of a disability policy – especially an individual policy – can vary greatly based on benefit length and amount, age, gender, occupation, and riders, but expect to pay between 1 to 3 percent of your annual salary. That means a person making $100,000 can expect to pay between $83 - $250 per month.

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1 https://www.policygenius.com/disability-insurance/disability-insurance-rates-by-age/

2 Conditions and limitations apply. Medical information is not required when exercising an option for additional coverage. Taken into consideration are your income, occupation and employment, as well as all disability insurance in force, for which you’ve applied or are eligible to receive. Coverage may not be added while you’re disabled, when benefits are payable, or during a suspension period.

3 This benefit is not necessarily protection against increases in the cost of living.

4 The Rider provides coverage for period of 10 or 15 years from the Policy Date. When a qualifying total disability occurs, benefits are only payable during the remaining portion of the 10- or 15-year term that has not elapsed when the disability begins.

5 Retirement Protection Plus is not a pension plan, qualified retirement plan or qualified individual retirement account or a substitute for one.

6 For individual disability insurance, you need to be underwritten and may or may not qualify for coverage.

2022-142270 20240831