Illness or injury can disrupt more than just an employee’s life. It can impact your entire business. Even a short absence can create unexpected challenges for small and mid-sized teams.
Offering both short-term and long-term disability insurance helps your employees stay financially secure while keeping your operations running smoothly. It also gives your business an edge in a competitive hiring market by supporting recruitment and retention.
But choosing and managing disability coverage can be complicated, especially for SMBs. That’s why it’s important to understand how short-term and long-term disability plans work together to protect your people and your business and how PrestigePEO can help you integrate them into your employee benefits offering.
This article explains:
- Why short-term and long-term disability serve different purposes
- How offering both helps employees stay financially stable during medical leave
- Why disability coverage can strengthen recruiting and retention
- How PrestigePEO supports SMBs with enrollment, compliance and plan administration
The Basics of STD and LTD
Each type of disability coverage addresses different employee needs and timeframes. But for employers, the distinction also affects how you plan benefits, manage costs and stay compliant. If you’re only offering one or misunderstanding how they work together, it can leave costly gaps in coverage. That’s why it’s essential to understand both types of coverage and why each plays a different role in protecting your people and your business.
Short-Term Disability
Short-term disability (STD) provides a safety net for temporary illness, injury, or medical conditions that prevent employees from working, offering them a sense of relief and security.
- Coverage Duration: Up to 6 months
- Elimination Period: Generally, 7 to 30 days before benefits begin
- Income Replacement: Usually covers 40% to 70% of the employee’s salary
From recovery after surgery, fractures and back injuries to maternity leave, STD typically lasts between three to six months. It provides partial income replacement, helping employees stay financially stable while they recover.
Long-Term Disability
Long-term disability (LTD) insurance is meant to cover severe medical conditions, injury, or illnesses that will keep employees out of work for an extended period.
- Coverage Duration: Several years or until retirement, depending on the policy
- Elimination Period: Typically 90 to 180 days, often beginning after STD benefits are exhausted
- Income Replacement: Usually 50% to 70% of the employee’s salary
LTD can be necessary in cases of illnesses like cancer, stroke, or a chronic condition. It offers financial protection for those facing a long recovery or permanent limitations that may mean they never return to the job.
What Disability Insurance Does Not Cover
While disability insurance offers critical support, it’s equally important to understand what it doesn’t cover. Knowing the exclusions upfront helps you set clear expectations and avoid coverage gaps.
Common exclusions:
- Pre-existing conditions
- Self-inflicted injuries
- Acts of war
- Illegal activities
- Substance abuse
- Certain risky behaviors
Why Your Employees Need Both Types of Coverage
For SMBs, providing disability benefits to employees is a significant investment, but it offers a practical solution for those dealing with an injury, illness or medical condition that may keep them away from work.
Here are four ways STD and LTD coverage helps:
Comprehensive protection
Ensures employees can still have at least a partial income while waiting for LTD benefits to begin.
Employee well-being
Employees will feel more valued and protected, which improves the overall satisfaction at work.
Recruitment efforts
Job seekers are looking for more than a paycheck. Offering STD and LTD means SMBs can be more competitive with larger companies.
Risk mitigation
Disability coverage can help SMBs avoid inconsistent leave, salary disputes and legal liability related to unpaid medical leave.
Misconceptions Surrounding Disability Coverage
SMB owners hesitate to offer disability employee insurance plans due to several misconceptions.
Misconception #1: Employees don’t need both
Some SMBs assume offering either STD or LTD is enough. But each plan serves a different purpose, STD helps bridge short absences like recovery or surgery, while LTD supports employees through longer, more serious conditions. Without both, coverage gaps can leave employees without income and employers vulnerable to leave disputes or low morale.
Misconception #2: Coverage is too expensive
Many employers assume disability coverage will be too costly to maintain. But combined STD and LTD plans typically cost just 1% to 3% of an employee’s annual salary, often less than the hidden cost of turnover, absenteeism or extended unpaid leave. PrestigePEO helps SMBs access affordable group rates while simplifying administration.
Misconception #3: Employees don’t need long-term coverage
It’s easy to think LTD is unnecessary if your team is young or healthy. But one in four workers will face a disability lasting a year or more in their career. Without LTD, employees could be left without income and your business could face pressure to extend unpaid leave, absorb workload gaps or deal with legal complications.
The Role of PrestigePEO
At PrestigePEO, we go beyond basic disability coverage support. We serve as a strategic partner to help SMBs offer, manage, and optimize short—and long-term disability plans. From plan design to ongoing compliance, our team ensures your benefits program supports your employees and business goals.
1. Find cost-effective coverage
Our business model allows PrestigePEO to bundle plans that help SMBs access the same coverage that’s usually reserved for large corporations. This means you enjoy cost-effective options that are more aligned with your bottom line.
2. Benefits administration
From enrollment and payroll deductions to claims management, PrestigePEO helps administer STD and LTD insurance. This means less of a burden on internal HR teams and a better experience for employees.
3. Compliance management
Many states have employment laws regarding disability insurance. PrestigePEO takes care of all notices and renewals to prevent disruption of coverage and reduce the risk of legal complications.
4. HR support
Our experienced HR experts work with your team to help employees enroll, assist with communication, handle payroll deductions, administer benefits and make claims.
5. Employee guidance
PrestigePEO provides materials and resources to help employees choose the right plan and coverage. We offer FAQs, one-on-one support and more to help them make informed choices.
Ready To Offer Disability Insurance?
Offering both short-term and long-term disability insurance helps protect employees across different types of leave and helps your business stay resilient, compliant and competitive.
If you’re looking for a simpler way to manage benefits, connect with PrestigePEO for tailored support.
Protect your team and your business. Let’s explore STD and LTD options together.
