STD vs LTD Comparison
| Feature | Short-Term Disability | Long-Term Disability |
|---|---|---|
| Benefit amount | 60–70% of pre-disability income | 50–70% of pre-disability income |
| Elimination period (waiting) | 0–14 days (injury) / 7–14 days (illness) | 90–180 days (often = end of STD period) |
| Benefit duration | 3–6 months (up to 1 year) | 2 years, 5 years, to age 65, or lifetime |
| Who pays premium | Often employer-paid | Mix: employer-paid or employee-paid |
| Benefits taxable? | If employer-paid: yes; if employee post-tax: no | Same: depends on who paid premiums |
| Covers | Illness, injury, surgery, pregnancy | Serious illness, chronic conditions, injury |
Own-Occupation vs Any-Occupation
The disability definition determines how easy it is to qualify for benefits—it's the most important policy feature to understand:
| Definition | What It Means | Better For |
|---|---|---|
| Own-Occupation | Disabled if you can't perform the duties of YOUR specific occupation | Specialized professionals (surgeons, lawyers) |
| Any-Occupation | Disabled only if you can't perform ANY job for which you're reasonably suited | Employer-paid plans (more common, harder to qualify) |
| Modified Own-Occ | Own-occ definition for first 2–5 years, then switches to any-occ | Middle ground; common in employer LTD plans |
Tax Treatment of Benefits
Whether your disability benefits are taxable depends on who paid the premium:
- Employer paid 100% of premium: benefits are fully taxable to you as ordinary income
- You paid 100% with after-tax dollars: benefits are tax-free
- Split between employer and employee: proportionally taxable
This is why some employees voluntarily pay for LTD coverage with after-tax dollars even when the employer offers pre-tax: tax-free benefits are worth more when you actually need them.
Coordination with SSDI
Most employer LTD plans offset SSDI benefits—if you receive Social Security Disability Income, your LTD benefit is reduced by that amount. The insurance company collects the same total; you're not "double dipping." The insurer often requires you to apply for SSDI and may advance benefits pending approval.
If your STD lasts 6 months and your LTD has a 180-day elimination period, they may align perfectly. But if STD ends at 3 months and LTD's elimination period is 6 months, you face a 3-month gap with no benefits. Check both policies carefully and build 6 months of emergency savings to cover potential gaps.