Short-term Disability Insurance

Short-term Disability Insurance: When You Need Short Term Insurance

When young people first graduate from high school of college, they don’t often think of benefits when seeking a job. Many times they are still on their parents’ health insurance, and they don’t know much about any other kind of insurance. Fortunately for the uninformed, most companies who have short-term disability insurance do not require the employee to pay for it, though some allow a higher percentage at the employee’s expense. The purpose of short-term disability insurance is to replace a portion of your pay, usually between 60-70%, when you are unable to work for a period that exceeds any sick time and unused vacation time (or one week in some companies) and up to a maximum of twelve weeks, usually determined by length of service with the company. In most companies, maternity leave falls under short-term disability, although some may have a separate provision for that.

What Happens If You’re Really Sick?

We usually take our health and jobs for granted until disaster strikes. What happens if you wake up one morning with an appendicitis, heart attack, or worse yet, you are in a car accident that requires hospitalization and a recuperation period of at least one month? Fortunately, if you work for a company that has short-term disability insurance, you won’t have to worry a great deal about it. Some companies require that you use all of your vacation time and sick time before paying short-term disability, but with others, it requires only a one week waiting period. You will not receive the same pay as you did working, but since no taxes are deducted, you won’t notice much of a difference. The amount of time you can receive short-term disability is contingent upon service time, but it usually has a maximum of twelve weeks.

When Do You Need Short-term Disability Insurance?

As much as all of us would like to think we would never need short-term disability insurance, the reality is that if we work from the time we leave high school or college until the time we reach retirement, there will be at least once that we will need to use it. It may be because of an accident, illness, surgery, or pregnancy, but something will give us a reason to use it at sometime in our lives.

What If I’m Taking FMLA?

Sort term disability is not a part of FMLA (Federal Medical Leave Act). The law does not say that you have to be paid for leave, only that the company is required to give you time off for illness within your family, pregnancy, adoption, and other family-related emergencies. Though short-term disability only covers you, if you took FMLA because of illness, you are entitled to the benefits.

How Much Can I Collect?

The amount of your short-term disability depends on the provisions of your company, but in most cases, it varies from 60-70% of your pay, and because it’s insurance, it is not taxable. In addition, remember that you have no expenses for going back and forth to work such as transportation and other work-related expenses. That doesn’t mean short-term disability insurance is just as good as your paycheck, but it is a means for you to take care of financial obligations while you are recuperating from illness, injury, and medical procedures.

Does My Employer Have to Provide Short-term Disability insurance?

Although most larger companies do provide their employees with short-term disability insurance, there is no requirement that they do so. In some smaller companies, it is offered as an option only, and you must pay for it. If your company doesn’t offer it, you can obtain it through your insurance carrier, and though it probably won’t be as cheap as the coverage through an employer, it will prevent you from having no income in the event of a major illness or accident.