Short-term disability insurance (STDI) is most often obtained through a group plan from an employer. These plans are “guaranteed approval”, which means that you will not be required to go through a medical exam or the same kind of information gathering and underwriting required for a long-term disability insurance (LTDI) policy.
STDI policies are available through private insurers if your employer does not offer it or you are self-employed. In the case of going through a private insurer, you will likely need to have a medical exam.
Your coverage and expenses for a short-term disability insurance policy is going to vary from employer to employer. Some employers cover 100% of your premiums, while others require employees to pay a small percentage. With most policies, coverage doesn’t start until you have worked for a certain amount of time (often 30-60 days) and does not cover employees working less than 40 hours per week.
Some states legally require employers to offer STDI to their employees.
Short-term disability coverage normally covers up to 80% of your income. Coverage usually includes chronic conditions like back injuries, heart disease, injuries suffered outside of work, and more and more policies are covering leaves for pregnancy.
Short-term disability insurance does not cover injuries suffered at work. They are covered by workers’ compensation instead.
Policies cover your income for a designated period of time, most commonly 30 to 90 days.
To qualify for benefits you must file a claim with the insurer. Benefits typically start immediately or up to 2 weeks after the injury or diagnosis.
How Much Does STDI Cost?
Short-term disability insurance can cost anywhere from $0 (if your employer covers 100% of the cost) to a few hundred dollars per month. Coverage through an employer sponsored plan is preferable because of the cost.
The cost for an individual purchasing a policy through a private insurer is usually not worth the price. Most financial advisors will recommend instead just putting the money away you would spend on premiums into an emergency savings account.
Ideally, you want your STDI and LTDI to work together to protect you if longer coverage is needed.
Long-term disability insurance has a waiting period called an elimination period. The elimination period can range from 30 days to abou one year. If you can pair the elimination period with the timeframe of your STDI coverage, you will not have a period of time where you are collecting no income.
Again, if your employer does not offer short-term disability insurance or you are self-employed, most of the time it is going to be more beneficial to just put what you would be spending on premiums into a savings account. Most of the time STDI benefits are only going to be paid out for 1-2 months, and you can easily save up the amount of money you would be missing in income during that time frame. Your premiums would quickly outpace that amount and if you never place a claim you would never see any benefit from those payments.