Long-term disability typically pays less per month, but for much longer

Short-term disability usually replaces a higher percentage of your salary — often 60 to 70 percent — but only for a few months. Long-term disability typically replaces 40 to 60 percent of your salary, but continues for years or until retirement age. The total amount you receive depends on how long you remain unable to work, not which type pays more per check.

If you return to work within three months, short-term disability will have paid you more overall. If you cannot work for two years or longer, long-term disability will have paid substantially more, even at the lower monthly rate. The real difference is not which one pays better — it is that they cover different lengths of time.

Key Takeaways

  • Short-term disability pays a higher percentage of your salary each month but stops after a few months, usually between three and six.
  • Long-term disability pays a lower percentage of your salary each month but continues for years, sometimes until you reach retirement age.
  • Your employer's plan documents spell out the exact percentage each type pays and when long-term benefits begin after short-term ends.
  • Some employers coordinate the two so that short-term disability ends exactly when long-term begins, with no gap or overlap.
  • The total money you receive depends entirely on how long your disability lasts, not on which type of insurance is "better."

How the payment amounts actually work

A short-term disability plan might pay you 66 percent of your weekly salary for up to 13 weeks. If you earn $1,000 per week, that is $660 per week. After 13 weeks, the payments stop — whether you have returned to work or not.

A long-term disability plan might pay you 50 percent of your monthly salary starting on day 91 of your disability (after short-term ends). That same $1,000 weekly earner would receive roughly $2,167 per month. If the disability lasts 24 months, the total from long-term is $52,008. The short-term total was $8,580. But if the disability lasts only six weeks, short-term paid $3,960 and long-term paid nothing.

The percentage each plan pays is set in your employer's plan document. Some employers offer 50 percent long-term and 66 percent short-term. Others offer 60 and 70. A few offer 40 and 60. You can find your exact percentages by asking your benefits department or reviewing your Summary Plan Description (SPD), which your employer is required to provide.

When short-term ends and long-term begins

Short-term disability has a defined end date — typically 3, 6, 13, or 26 weeks depending on your plan. Long-term disability has a defined start date, usually 90 days (13 weeks) after your disability began. Most employers design their plans so these dates line up: short-term covers weeks 1 through 13, and long-term begins on day 91 with no gap.

Some plans have a waiting period built into long-term disability. You might be required to be out of work for 90 days before long-term even considers your claim. During those 90 days, short-term disability is paying you. Once day 91 arrives, short-term stops and long-term takes over — if you still cannot work.

If your short-term benefits run out before you can return to work, you will need to file a separate claim with your long-term disability insurer. This is not automatic. Your employer or the short-term insurer may notify the long-term insurer, but you should confirm that your long-term claim has been filed before your short-term payments end.

What happens if you improve partway through

If you recover and return to work while short-term disability is still paying, both short-term and long-term stop. You receive no further payments. This is why the total amount matters more than the monthly rate: a person who recovers after two months receives only short-term payments, while a person with the same condition who does not recover for two years receives both short-term and long-term.

Some long-term disability plans include a "return to work" benefit that pays a reduced amount if you go back to work part-time or at a lower salary while still partially disabled. This is not common, but it exists in some employer plans. Check your plan document to see whether yours includes this option.

How your salary affects the total payout

The higher your salary, the larger the gap between short-term and long-term payments becomes. A person earning $40,000 per year might receive $1,538 per month from short-term (66 percent of $2,333 weekly) and $1,667 per month from long-term (50 percent of $3,333 monthly). The difference is $129 per month.

A person earning $120,000 per year might receive $4,615 per month from short-term and $5,000 per month from long-term — a difference of $385 per month. Over 24 months, that is $9,240 more from long-term. However, many long-term disability plans have a maximum monthly benefit cap — often $5,000 or $10,000 — so very high earners may not see the full 50 percent replacement.

Your plan documents will state whether there is a cap and what it is. If you earn above the cap, your long-term payment will be the capped amount, not a percentage of your salary.

Tax treatment of disability payments

Whether your short-term and long-term disability payments are taxed depends on who paid the premiums. If your employer paid the premiums entirely, the payments are taxable income and you will owe federal and state income tax on them. If you paid the premiums with after-tax dollars, the payments are not taxed. If you and your employer split the premiums, a portion of the payment is taxed and a portion is not.

This matters because it reduces the actual amount you take home. A $2,000 long-term disability payment that is fully taxable might net you only $1,500 after taxes, depending on your tax bracket. Ask your benefits department or your plan's insurance company which portion of your payments will be taxed so you can plan accordingly.

Frequently Asked Questions

Can I receive both short-term and long-term disability at the same time?

No. Short-term disability ends on a specific date (usually 13 weeks), and long-term disability begins on a different specific date (usually day 91). Most plans are designed so these dates overlap slightly or line up exactly, but you receive payments from only one plan at a time. Once short-term ends, you receive long-term if you are still unable to work and your claim has been approved.

What if my long-term disability is denied but I am still unable to work?

If your long-term claim is denied after short-term ends, your income stops. You would need to appeal the denial or explore other options such as workers' compensation (if the disability is work-related), state disability programs, or SSDI. Contact your plan's insurance company when ready if you receive a denial so you understand the reason and whether you can appeal.

Does my salary increase affect my disability payments?

No. Your disability payment is calculated based on your salary at the time you became disabled. If you receive a raise while on short-term or long-term disability, your payment amount does not increase. This is why the percentage replacement matters: a 50 percent replacement of $60,000 is $30,000 per year, even if your salary would have grown to $65,000 had you kept working.

What is the maximum I can receive from long-term disability?

This varies by plan. Some plans cap the monthly benefit at $5,000, others at $10,000, and some have no cap. Your Summary Plan Description will state the maximum. If your plan has a cap and your 50 percent replacement would exceed it, you receive the capped amount instead.

If I go on short-term disability, am I automatically enrolled in long-term?

Not automatically. You must file a separate claim with your long-term disability insurer, usually before your short-term benefits end. Your employer or short-term insurer may help with this, but do not assume it has been done. Contact your benefits department or the long-term insurer directly to confirm your claim has been filed.