Short-term Disability Coverage. In the event of a disability caused by injury or sickness that occurs off the job, this policy pays disabled employees a percentage of their pre-disability income after they have used up their sick leave or other paid time off. An employee might use short-term disability in the event of a broken bone, sprain or strain, cancer treatments, minor surgery, or pregnancy that keeps him or her out of work for several weeks, but will resolve fairly quickly. An event triggering short-term disability coverage usually lasts less than six months.

Long-term Disability Coverage. After short-term benefits, sick leave, and other paid time off is used up, long-term benefits may kick in. Usually long-term disability is used in the case of a catastrophic illness or injury, or a chronic illness that will worsen over time and impair the person in such a way that he or she cannot work. Long-term disability benefits can continue for a set amount of time, such as five years, or may continue providing a portion of the employee's pay for the remainder of his or her life until Social Security benefits begin.

As an employer, you may choose to combine short-term and long-term disability insurance in a single benefit package. Unlike workers' compensation, the long-term disability insurance you offer will help pay your employees' expenses even for injuries and illnesses that are not work related.

As you research disability insurance products, keep the following in mind:

• Cost. Disability insurance costs can vary widely depending on the size of your company, the benefits offered, and other factors.
• Definition of disability. Find out what types and degrees of disability the plan covers. Does the plan make provisions for "partial disability," when an employee can work only on a part-time basis or is required to perform reduced work duties?
• Duration of benefits. Different plans have varied durations that determine when short-term benefits end and long-term benefits begin and end.
• Rehabilitation Rate. Investigate how successful the insurance carrier has been at getting people back to productive work in a timely manner.
• Coordination and Integration. Find out how the plan fits in with Family and Medical Leave Act obligations, workers' compensation, Social Security, and other benefits that are triggered by a disabling event.
• Flexibility. Determine how well the disability insurance you are considering fits in with your total benefits package, and what your options are for changing or customizing it as your business grows and changes.