Disability insurance is coverage that provides you with income protection, should you lose time on the job due to an injury or illness. With disability coverage, you are compensated for a portion of your lost income.
Group disability insurance provides income protection for employees as well as cost-saving management strategies for employers. For employers, lost time on the job due to a disability can significantly impact workplace productivity and profitability. However, disability insurance provides partial replacement of lost income for employees while also covering overtime and costs of hiring replacements.
Short Term Disability: STD is a type of disability insurance coverage that can help you remain financially stable should you become injured or ill and cannot work. Usually, STD coverage begins within one to 15 days of the event causing your disability. The coverage allows you to continue to receive pay at a fixed weekly amount or a set percentage of your income.
STD typically lasts for about 10 to 26 weeks, although this varies by policy. When this STD coverage ends, long-term disability (LTD) coverage typically takes effect.
LTD is a type of disability insurance coverage that pays employees a set percentage of their regular income after a specified waiting period. For example, if a worker is covered under short-term disability (STD) insurance as well, the LTD insurance would kick in once the STD policy is exhausted, typically after three to six months.
LTD insurance protects workers in the event they become disabled for a prolonged period prior to retirement. The length of LTD plans varies; some may be limited to a period of 2-10 years, while other plans continue paying out until age 65.