When an employee is unable to work due to illness or injury, disability insurance is designed to help replace a portion of their income during that time. Many group benefits packages include short-term disability, long-term disability, or both, but the two serve different purposes and understanding the distinction can help employers communicate these benefits more clearly.
What Short-Term Disability Typically Covers
Short-term disability insurance is generally intended to provide income replacement for a temporary period, often ranging from a few weeks up to several months, depending on the policy. It’s commonly used for situations such as recovery from surgery, a non-work-related injury, or complications from childbirth. Benefit amounts and waiting periods, sometimes called elimination periods, vary by plan.
What Long-Term Disability Typically Covers
Long-term disability insurance is designed to pick up where short-term coverage leaves off, providing income replacement for more extended periods, potentially years or, in some cases, until retirement age, depending on the terms of the policy. It’s generally intended for more serious or extended health conditions that prevent someone from working for a longer stretch of time.
An Example of How the Two Might Work Together
Consider an employee recovering from a significant surgery. Short-term disability might provide income replacement for the first several weeks of recovery. If complications extend the recovery period well beyond what short-term disability covers, long-term disability benefits, if included in the plan, would generally begin once the short-term benefit period, and any applicable waiting period, has ended. This is a simplified illustration, and actual benefit triggers depend on the specific terms of each policy.
Why the Distinction Matters
Without a clear understanding of the difference, employees may assume they’re covered for a longer period than their policy actually provides, or they may not realize a gap exists between when short-term benefits end and long-term benefits begin. Clear communication about elimination periods, benefit duration, and the percentage of income replaced can help set accurate expectations.
Considerations for Employers Building a Benefits Package
Employers exploring disability coverage as part of a group benefits package often weigh a few factors:
- Whether to offer short-term disability, long-term disability, or both.
- Whether coverage is employer-paid, employee-paid, or shared.
- How benefit amounts and durations compare to what similar employers in the industry offer.
- How clearly the plan documents explain waiting periods and benefit triggers to employees.
How This Fits Into a Broader Leave Policy
Disability benefits are separate from job-protected leave laws, such as the federal Family and Medical Leave Act, which addresses whether an employee’s job is protected during a leave, rather than whether their income is replaced. Employers often find it helpful to review how disability benefits, paid time off policies, and any applicable leave laws work together, so employees have a clear picture of both their job protection and their income replacement during an extended absence.
Helping Employees Understand Their Coverage
Beyond simply offering disability benefits, helping employees understand how the coverage works can make a real difference if they ever need to use it. This might include a short explainer during open enrollment, a one-page summary of benefit amounts and waiting periods, or a point of contact for questions.
Reviewing Your Current Disability Benefits
If your group benefits package already includes short-term or long-term disability coverage, periodically reviewing benefit amounts, waiting periods, and how the two coverages work together can help make sure the package still serves your workforce well.
Heritage Insurance Partners can help you review your current disability benefits or explore adding this coverage to your group benefits package. Contact us at (804) 794-4500 or request a consultation online.
