How disability insurance works: short-term vs long-term coverage

Executive overview

Many employees are unaware of the gaps between FMLA, workers' comp, SSDI, and actual income replacement during a disability. Employer-sponsored disability insurance fills those gaps with a monthly cash benefit funded by payroll-deducted premiums.

Benefits are typically 45–65% of income, and policies include an elimination period before payouts begin.

Short-term coverage bridges the gap; long-term coverage begins exactly where short-term ends.

What disability insurance is — and what it isn't

• Pays a monthly cash benefit to replace lost wages during a qualifying disability, in exchange for a monthly premium
• FMLA provides only 12 weeks of unpaid, job-protected leave — no cash benefit
• SSDI pays monthly benefits only to those who have paid into Social Security taxes long enough to qualify; 2022 thresholds: $1,350/month (non-blind), $2,260/month (blind)
• Workers' comp covers only injuries or illness directly caused by the job; Texas does not require it at all
• Employer group coverage typically offers lower premiums than individual policies

How premiums and benefits are structured

• Premiums deducted from paycheck; vary by age, income, and occupation
• Higher-risk industries and older workers pay more
• Cash benefit is 45–65% of the employee's income
• All policies include an elimination period — a waiting period before benefits begin

Short-term vs long-term disability

• Short-term disability covers weeks to months, up to roughly one year depending on the policy
• Most short-term policies have an elimination period of up to two weeks
• Long-term disability is designed as an extension of a short-term policy — coverage begins when short-term ends
• Long-term policies may pay out for several years or for life
• Employees should evaluate their personal situation before electing coverage