Short-Term vs Long-Term Disability Term Insurance Plan

Written by : Knowledge Centre Team

2021-07-11

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Short-term and long-term disabilities are one the most ignored and shrugged off contingencies. Even in insurance that has been mandated by the legal system ignoring the damage to self is only a matter of cost negotiations.

So, even though assets like cars are fully insured, the life of the travellers remain unpredictable. Health is one factor which defines the quality of life from various perspectives. Thus, health is something that you would not only like to guard carefully but also like to recover quickly after a contingency like illness or disability.

Health insurance and disability insurance are useful in improving your chances of recovery without big financial setbacks. However, you should know which disabilities and health issues the insurance will cover. Because you will bear the full cost of the conditions not covered by insurance.

Short-Term vs Long-Term Disability

Disability is a condition that affects your mental and physical health. It can be caused by accidental injuries or critical illnesses and can result in the loss of income for your family. To protect your family financially in such circumstances, you need to have disability insurance. It helps you replace a part of your income in case of disability.

Insurance classifies disabilities in the following categories for better identification and coverage:

Total & Permanent Disability: Refers to complete loss of function or amputation of two limbs, i.e., both hands, one hand one leg, both eyes, hearing
Total Temporary Disability: Loss of function in two or more limbs for a short period of time
Partial Permanent Disability: Loss of one limb
Partial Temporary Disability: Disabilities like fractures, where the function is lost for a short period of time. Such disabilities are generally not covered by disability insurance unless the disability continues for a long period.

Short-Term vs Long-Term Disability in Term Insurance Plan

You can add disability covers to your term insurance cover. Disability riders will enhance your coverage and make your term insurance more useful for you and your family. However, you should carefully check the covered disabilities while buying the plan.

Two Types of Disability Covers

Short Term Disability Insurance: These insurance plans cover you for a short time after you have fallen ill or had an injury that keeps you out of work. The policy benefit can cover you from three months to 2 years. You can continue to receive the benefits until your coverage is exhausted or you fully recover to start working.
Long Term Disability: These insurance plans ensure that you are eligible for benefits for as long you live, for a few years, or up to your retirement age. Long-term disability insurance covers catastrophic illnesses and injuries that can lead to job loss. You are protected from medical conditions like mental illness, heart disease, etc.

Short Term Disability Insurance	Long term Disability Insurance
It provides coverage for partial or temporary disability caused by injuries.	It provides coverage for a permanent total disability caused by accidental injuries or illnesses.
It is applicable for a limited period, and usually, the maximum coverage period is two years.	It is applicable for several years - 5, 10, or 20 years.
The waiting time is between 0 and 14 days.	The waiting time is high and can vary between weeks to a few months.
The premium amount is lower.	The premium is on the higher side.

Both the insurance categories provide you insurance against disability. There are underlying differences between them that you must understand. It will help you pick the right plan:

Features of a Term Plan With Disability Insurance

Before buying a disability insurance term plan, you should keep certain things in mind. It will help you decide which plan is better suited for you. Below are some features to consider:

Features	Description
Guaranteed Renewable	A disability insurance plan can be renewed easily, and you can continue to receive the same benefits from your insurance company. The insurance company cannot cancel. However, they can increase the premium rate if you are in the same group where rates are increasing.
Premium Amount	Before buying disability insurance (short or long-term), you should check the premium amount in the respective category. Choose an insurance company that offers you the same benefits at a lower price.
Cost of Living Adjustments	Your expenses will increase with time because of inflation. The benefits you have opted for today may not be enough five years from now. If you opt for this feature, benefits increase as the inflation increases.
Non-cancellable	If you continue to pay your premiums, the insurance company has no right to cancel your policy. You can continue to renew your policy once the previous one expires without reducing the policy benefits.
Return of Premium	If you do not make any claims during the policy tenure, some policies offer you a return of premium option. You get back the total premium paid at the end of the policy tenure. iSelect Smart360 Term Plan from Canara HSBC Life Insurance offers you term insurance along with coverage against 40 critical illnesses, accidental disability and death along with the return of premium feature.
Additional Riders	You should check whether additional riders are available with disability insurance. If so, you can avail them along with the insurance plan at affordable rates.

Which Disability Plan should you Have?

Having understood both the plans and the differences between them, you may be wondering which plan you should choose. It is impossible to predict whether you will have a short-term disability or long term.

In case you opt for short-term disability insurance, and a long-term disability happens, the coverage and pay out from the policy plan may not last long and eat up all your savings. In such situations, it is best to have long-term disability insurance to protect your family financially.

Hence, having both the insurance plan is a good option to consider. You can also consider term plans like iSelect Smart360 Term Plan which provide you with life cover along with disability and critical illness benefits all under the same plan.

The term, disability and health insurance are the most essential plans everyone should have. However, these plans also suffer from inadequate adoption. People buying the plans often worry about the long-term costs rather than the contingent benefit.

Contingencies like short-term or long-term disabilities have long-term financial implications. Having a solid financial planning to protect the financial needs of your family even in your absence is an absolute necessity. Inadequate insurance cover leaves you and your family vulnerable to the adverse financial consequences of long-term income loss.

Thus, adequate insurance cover is also important. You can decide the sum assured of your disability insurance based on the income you want your family to receive every month while you recover.

While the term insurance cover is usually 10-15 times your annual income, disability cover can be about 25% of this amount.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.