Disability Insurance

Disability Insurance. Short-term disability insurance pays a percentage of wages if an employee must miss work due to illness or injury. Many employers offer it as a benefit, but individuals can also purchase it. Workers often receive 40% to 70% of their weekly salary through short-term disability insurance, up to a certain dollar amount.

Fishing and logging. Roofing and construction. Pilots and delivery drivers. Many of us recognize these as some of the most dangerous occupations, but what about employees who work in an office? Or even from home?

The truth is that anyone can sustain an injury or become seriously ill. That’s why many employers and individuals pay for short-term disability insurance.

What Is Short-Term Disability?

Short-term disability is insurance that helps replace a person’s income if they have an injury or illness that makes them unable to work. According to the Bureau of Labor Statistics (BLS), short-term disability is available to 40 percent of civilian workers in the United States.

Individuals can also buy it through private companies, and some state governments provide short-term disability to eligible workers.

Short-Term vs. Long-Term Disability

Short-term disability is intended for temporary injuries and illnesses and has a maximum duration of anywhere from six months to one year.

Long-term disability policies last anywhere from two years up until a recipient reaches retirement age. Note that, per the Social Security Administration, the normal retirement age varies based on birth year.

For those with more permanent conditions, short-term disability can still fill an important gap as workers apply for long-term disability benefits.

Short-Term Disability vs. Family Medical Leave Act

The biggest difference between short-term disability and the Family Medical Leave Act (FMLA) is that disability insurance is paid.

The FMLA stipulates that employers must hold an employee’s job for a certain number of days off, but they do not have to pay the employee in most states. Only California, New York, New Jersey and Rhode Island mandate that certain employers provide paid disability and paid family and medical leave.

Another difference is that the FMLA allows workers to care for a family member for medical reasons, while short-term disability is for the covered individual only. The FMLA also has a shorter duration, typically allowing up to 12 weeks of leave.

Benefits of Short-Term Disability

The benefit of short-term disability for workers is that it provides an alternate source of income when they cannot work. It can help them pay the bills and avoid falling into debt if injured or sick.

Employers also benefit from providing short-term disability. Comprehensive benefits packages can help attract new talent, retain current employees and improve productivity. Plus, providing payments when someone is unable to work may make it more likely that they return to their job once they have recovered.

How Does Short-Term Disability Work?

Short-term disability isn’t automatic. If a worker sustains an injury or becomes sick, they apply for benefits through their insurance carrier or state government. They will submit medical records and other proof, and the provider will then decide if they are eligible.

The complete answer depends on several factors, including the plan type, the worker’s previous salary and the injury or illness itself. Here are some of the most common questions about how short-term disability works.

How Long Does Short-Term Disability Last?

After a waiting period of seven to 30 days, a worker can receive short-term disability weekly basis three to six months, although some plans may provide benefits for up to one year.

How long short-term disability lasts also depends on the injury or illness. The medical community has guidelines regarding how long employees need to recover from various conditions, and insurance carriers use those guidelines to determine the duration of benefits.

If a worker needs benefits beyond the duration of short-term disability, they can apply for long-term disability insurance or Social Security Disability Insurance (SSDI).

Who Pays the Premium for Short-Term Disability?

In states where employers are not required to pay for short-term disability, they can offer various methods for premium payment, including:

  • Traditional: The employer pays the premium.
  • Voluntary: The employee pays the premium.
  • Contributory: The employer and employee split the premium.
  • Buy-up: The employer pays the premium up to a certain amount, and employees can buy more coverage.

How Much Does Short-Term Disability Pay?

Like many other aspects of short-term disability, the benefit amount varies based on the injury and the original salary. Employees typically receive anywhere from 40% to 70% of their weekly wages, up to a maximum of a certain dollar amount. For example, they may receive 60% of their normal weekly salary up to a maximum of $1,200 per week.

What Can an Employee Use Short-Term Disability For?

Employees can use short-term disability payments the same way they would use their regular paycheck, including for:

  • Childcare
  • College classes
  • Credit card payments
  • Groceries
  • Loan or car payments
  • Rent or mortgage payments
  • Utilities like electricity or gas

What Qualifies for Short-Term Disability?

The first thing a worker should consider is whether they are covered under an employer-provided plan. If they are, they may need to:

  • Have worked for the employer for a certain amount of time.
  • Work 30 hours or more per week to qualify as a full-time employee.

If they fulfill these requirements, the next step is to determine whether their claim meets the requirements. Workers can submit a claim for:

  • Accidents and injuries that were not related to their job. If the worker sustained an injury on the job, workers’ compensation insurance may cover the claim.
  • Serious illnesses like cancer or musculoskeletal disorders. Some plans may not cover mental illness.
  • Pregnancy and maternity leave under some plans.

What doesn’t qualify for short-term disability? A plan may not cover a claim if an employee:

  • Loses their license to practice their occupation.
  • Commits a crime and goes to jail.
  • Is unable to work due to war.
  • Is injured due to their actions.
  • Has a pre-existing condition.

Final Thoughts: Finding the Right Short-Term Disability Plan 

There is no real downside to employer-provided, fully paid short-term disability benefits. Employees should take advantage of these benefits if employers offer them.

But how does short-term disability work for those not covered by their employer? Is it worth it to buy an individual plan? This can depend on questions like:

  • What are my chances of being injured or becoming sick? Will I be covered by workers’ compensation?
  • What percentage of my pay do I need to receive per week? Do I need to cover my family or just myself?
  • What premium can I afford? What do I receive for that premium?
  • Do I also need long-term disability insurance?

While short-term disability is a temporary solution, it can help workers meet their financial needs in cases of injury or illness. The employer or provider can help determine the best plan based on factors like current financial needs.

Top Takeaways

  • Short-term disability insurance provides a worker with weekly payments if they become disabled due to an injury or illness. Some policies also cover pregnancy.
  • Workers typically receive 40% to 70% of their weekly salary through short-term disability insurance, up to a certain dollar amount.
  • Payments typically last from three to six months but may last up to a year.
  • Many employers provide short-term disability as a benefit. California, New York, New Jersey and Rhode Island mandate that certain employers do so.
  • The right short-term disability plan depends on an individual’s financial needs and other factors.