Q: What is The Difference Between Short and Long Term Disability Insurance?
The term “disability insurance” encompasses both short term and long term disability type plans. The length of the benefit period usually defines the difference between the two programs. Short term plans, which Dave does not recommend, usually provides benefits during the first week of disability, up to a certain dollar amount, for a period of 13-26 weeks. Long term disability plans typically don’t begin paying benefits until 90 or 180 days of a disability and pay their benefits for a longer term such as 5 years or to age 65. Dave strongly recommends long term disability since our greatest asset is our ability to work and earn an income. His advice is to establish an emergency fund equal to 3 to 6 months your expenses and use that as a protective measure instead of buying a short term plan. By having your emergency fund you eliminate the need to pay month after month for a measurable risk which allows you to use those premiums to help pay down debt and grow your savings. Once you have your emergency fund you are actually paying yourself.