Is Short Term Disability Worth It

What Qualifies For Short

To qualify for short-term disability benefits, an employee must be unable to do their job, as deemed by a medical professional. Medical conditions that prevent an employee from working for several weeks to months, such as pregnancy, surgery rehabilitation, or severe illness, can qualify to receive benefits. Since employers in most states must legally provide;workers’ compensation insurance;to all employees, any injuries incurred on the job are typically covered under a workers’ comp policy and are therefore not eligible for short-term disability.

While most non-work-related temporary medical conditions are covered by a short-term disability policy, there can be exclusions for preexisting conditions or intentional and foreseeable injuries . While employees can qualify for time off under the Family and Medical Leave Act to care for a sick relative, most short-term disability policies would not provide benefits if the covered employee is not the one with the illness.

I Followed The Example Of My Fellow Business Insider Writer

Last summer, my friend and fellow Business Insider writer Jackie Lam wrote about how she experienced an eye injury that left her unable to work for a month. After that wake-up call, she signed up for disability insurance from Freelancers Union, a nonprofit that offers a range of services and benefits to freelancers, including disability insurance.

Jackie’s policy costs $23 per month and includes a benefit worth $2,500 per month. My mortgage and health insurance alone are more than $2,500 per month, so I definitely wanted a higher level of coverage.

Disability insurance from Freelancers Union comes with a 30- or 90-day elimination period, which is how long you have to wait before coverage begins. I took the maximum coverage available for my annual income and age. I pay $36.12 per month for $5,000 per month in coverage.

While I pay Freelancers Union automatically every month with my business credit card, the policy is actually underwritten by The Guardian Life Insurance Company of America. No matter where you buy insurance, it’s important to understand how the policy works and who pays your claims if you do become disabled.

How Long Does Long

Once long-term disability benefits have been approved, an employee can continue to receive benefits for the length of the policy term or until they return to work. Most long-term disability plans provide coverage for 36 months, although some plans can provide coverage for up to 10 years or even for the life of the policyholder.

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How Does Disability Insurance Work

Disability income insurance is an agreement made between insurance companies and policyholders. In exchange for the monthly payments you make, the insurance company agrees to pay you a monthly benefit amount if you suffer a disability that affects your ability to work.

Disability insurance is designed to replace a percentage of the income you lose due to your inability to earn a paycheck. Having disability insurance means being able to meet your financial obligations â paying bills, covering household expenses, providing for your family â while youâre unable to work.

A disability insurance policy will spell out:

• How much you will pay in premium. Just like any other type of insurance, this is the payment you must make each month to keep your coverage in force.
• How the policy defines disability. Some policies will pay out a monthly benefit if an injury prevents you from working at your normal job, but allows you to do other types of work that will nonetheless reduce your income. Other policies will not pay benefits if you are able to work in another type of profession, even if you earn less money.
• How much you will receive in benefits. In most cases, your benefit amount will be a percentage of your income. Policies typically pay 60 to 80 percent of what you earned before your disability.
• How long your benefits will last. The benefit period may be a certain number of months or years, or up to a certain age.

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Can I Skip One

Wondering which you could skip, short-term vs. long-term disability?

Well, that depends. Lets say you didnt have a paycheck for a month or two.

Could you get by on savings and PTO from your work?

If the answer is yes, then you may be able to get by without short-term disability insurance.

However, what if you were unable to work for a year or two? Because the average group long-term disability claim lasts 34.6 months.

Would you be able to continue to pay your mortgage? Your car payments? What about any medical bills from your disabling condition?

And even if you have more than two years worth of savingswhich would put you in a very small minority of Americanswouldnt you rather use that money for something other than covering your basic needs?

These are the types of considerations you need to weigh if youre considering short-term vs. long-term disability insurance.

Image by;Bob Miller;via Flickr and Wylio

About Council for Disability Awareness

Council for Disability Awareness has written 479 posts in this blog.

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How Much Does Disability Insurance Cost

Disability insurance costs for both short-term and long-term coverage can range from 1% to 3% of your annual income. So if you make $50,000 a year, thats $60 to $125 monthly. But youll pay less if youre get a long-term policy with a longer elimination period. If you can, get a non-cancellable insurance policy that, you guessed it, cant be cancelled by the insurance company even if your health changes.

Other things that affect how much you pay in premiums every month are your age, if you smoke, what you do for a living, and how much money you make. ;

And since insurance companies arent known for making things easy, another thing that impacts disability insurance cost is their definition of disability. If you want a policy that covers your job as a chimney sweep specifically, your premium would cost more compared to a policy that covers you at an office job.

Your State And Employer Do Not Provide Short

Most people with short-term disability insurance get it through their employer. A few states either provide or require employers to provide short-term disability insurance. If you live in California, Hawaii, New Jersey, New York, or Rhode Island, you are automatically covered when it comes to short-term disability insurance.

Even if you dont live in one of those states, short-term disability insurance is often provided voluntarily or offered as an add-on for employees who want to purchase it. Short-term disability insurance may not make the cut for smaller employers that are struggling to provide other basic employee benefits.

Dont assume your employer has you covered. Ask for details and find out for sure.

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A Guide To Short Term Disability For The Self

Plus the FAQs you need the answers to

More than five percent of Americans will experience a short-term disability this year. Yet 51 million Americans are without short-term disability insurance.

As a woman in the workforce, whether for a large corporation or as a self-employed contractor or entrepreneur, are you protected from a financial disaster should you be unable to work for several weeks or even months?

Read on to learn about short-term disability, what it covers, and how you can secure coverage that meets your unique needs.

Disability Insurance Benefits And Taxes

Generally, if you pay the entire amount of the disability premium yourself, your disability benefits will be tax-free. This may bring your income while on disability closer to your current take-home pay.

If your employer pays all or part of the disability premium, your disability benefits will be subject to income taxes.

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Do I Need More Coverage

Many people simply donât have enough coverage through their workâs group plan.

Many group plans only cover 60% of your income. Plus, since your employer is paying for it, itâs taxable, meaning your actual check could be closer to 40% of your income. Plans might also have maximum benefit amounts, which means that, especially for high-income earners, the income received for your family isnât nearly what youâre used to each month. Would you be able to cut your expenses by half to make that workable?

If you add a supplemental disability insurance plan to your group plan, you can get a discounted rate that can bring your coverage up to 80%. Thatâs much more manageable â by scaling back expenses and/or pairing it with an emergency fund, thereâs less of an impact on your lifestyle.

Whats The Strength Of My Group Plan

Most group plans arenât as robust as a private disability insurance policy. Most employer-provided disability insurance plans are own-occupation policies for the first two years of disability before switching over to any-occupation policies for the remainder of the benefit period; some may never be own-occupation. If you have a residual disability and canât perform your job to the same capacity as you could before â youâre still earning money, but less of it â your employerâs group policy might not cover that at all.

Compare that to a private disability insurance policy, where you can get own occupation covered for as long of a benefit period as you want â two, five, or 10 years, or even go all the way to retirement age. Considering one in eight workers will be disabled for five or more years over the course of their career, having that flexibility in terms of length of coverage is crucial.

Your work coverage might also be insufficient if you qualify for Social Security disability insurance . The group coverage could be offset by your SSDI coverage, meaning you wonât get as much as you were expecting through work. The good news? A private policy wonât be affected.

Buying a supplemental disability policy ensures that you have the most comprehensive coverage possible. If youâre relying solely on the group coverage you get through work, you donât have control of the type of policy it is â which means you could leave yourself vulnerable to loopholes.

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Youre An Independent Contractor

A lot of people fall into the independent contractor category these days. But one of the most basic elements of independent contractor status is specifically a lack of benefits.

Since your income as an independent contractor depends entirely on your ability to perform services for the employer, having at least short-term disability insurance in place is critical. Again, it will cover you for the most common forms of disability, that will generally last only a few months. And like the self-employed, you can rely on SSDI for long-term disability.

What Is A Disability Insurance Elimination Period

An insurance elimination period is just a fancy way of saying waiting period. Its the time between when you become disabled and file a claim and when your benefits actually begin being paid out to you.

The difference between a short and long elimination period is the difference between going into catastrophic debt or not if you become disabled:

• A short elimination period means less time scrambling to cover bills while you cant work.;
• A too-long elimination period could mean a major credit hit, eviction, or worse.

Luckily, you can choose your policys elimination period when shopping for disability insurance, balancing what you can afford in premiums with how fast you want your disability insurance to leap into action.

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Short Term Disability Vs Workers’ Compensation

It’s important to remember that short term disability insurance is different from workers’ compensation insurance, which provides coverage for injuries that occur on the job. Nearly 90 percent of disabilities are not work-related. Therefore, they are not covered by workersâ compensation.

If an injury or illness that limits your ability to work was caused by something unrelated to your job, workers’ compensation will not cover your lost income. Likewise, if you are injured or get sick from performing your job, short term disability insurance likely will not provide benefits during your absence from work.

Short Term Disability Insurance For The Self Employed

Many companies will offer their employees short term disability insurance for free or for a fee payable by the employee. ;If you would like to start your own company, then you will have to get short term disability insurance through a private company if you think you should be covered. ;If you do own your own company and work from home, there is a below average chance you will get injured all things considered. ;For instance, its pretty hard to break your leg while you try to run a successful money making blog from home :-).

If you are self employed and run a business where you are out and about during the day , then it may be a good idea to consider short term disability insurance for yourself. ;A person can still blog from home with a broken leg, but it would probably be pretty difficult to cut lawns with a cast on!

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What Should You Not Tell A Disability Doctor

Why You Should Not Share Any Personal Opinions Limit yourself to only talk about your condition and not opinions. Do not tell a disability doctor you think you are dying, that you think the examination is unnecessary, that you do not trust doctors, or that you believe your current medical treatment is not good.

Why You Need Disability Income Protection Before Youre Sick Or Injured

• Apply while youre healthy. You get the most favorable terms by buying individual disability income insurance before you need it. Once youre too sick or injured to work, you usually cant get the protection you need.;
• Lock in pricing. Once you have your non-cancellable and guaranteed renewable policy, the amount you pay each month is guaranteed, and the insurance company can never cancel your coverage as long as you make your payments on time. ;;
• Secure coverage while on the path to your career. If youre studying to become a professional such as a doctor, dentist, or a lawyer, you can apply for insurance before you graduate, with options to increase coverage as your income grows.;
• Customize your coverage. You can select options to customize your protection. These options can let you increase coverage as your income grows and help keep pace with the cost of living. You can even buy coverage to help you replace your retirement plan contributions or protect your ability to repay student loans during a period that you cant work due to sickness or injury.;

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How Disability Insurance Works

Oftentimes, insurance products will protect against a specific loss, such as when a property and casualty insurance plan reimburses the policyholder for the value of stolen property. However, in the case of disability insurance, this compensation relates to the lost income caused by a disability.

For example, if a worker earned $50,000 per year prior to becoming disabled, and if their disability prevents them from continuing to work, their disability insurance would compensate them for a portion of their lost income provided that they qualify. In this sense, disability insurance essentially covers the opportunity cost of the now-disabled worker.

In practice, there are many conditions that a policyholder must satisfy in order to receive these payments. This is particularly true in regard to the U.S. Social Security System. To qualify for government-sponsored disability insurance, applicants must prove that their disability is so severe that it prevents them from engaging in any type of meaningful work at all.

What If Youre Still Not Ready To Go Back To Work

If youre on short-term disability, your benefits will end when your predetermined time period is over or when you return to workwhichever comes first. But what if youve already maxed out your short-term disability benefits and you still cant head back into the office?

Lets return to our example of missing out on work for major back surgery. Your doctor determined that youd need six months to fully recover, and your short-term disability plan approved you for that amount of time.

However, you had some pretty significant complications with your surgery and your recovery. As the end of those six months draw near, its evident that you arent physically capable of sitting at a desk for eight hours each daythis is a problem that will plague you for a lot longer, perhaps even permanently. Now what? Are you just out of luck?

If you have long-term disability benefits, it should be straightforward enough to transition into those benefits if you meet the new definition of disability for your long-term plan. The definition for disability under a long-term plan is typically subtly different than the definition for short-term disability.

Some insurers require new paperwork from the claimant and new medical records before they will begin paying a long-term disability benefit, says McDonald.

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Best For Long Coverage Period: State Farm

State Farm

While many other short-term disability insurance companies limit your coverage to as few as three or six months, State Farm offers short-term disability policies with three-year benefit periods. This earns them our nod for the best company if you are looking for a longer coverage period.

• Coverage is offered in one- and three-year benefit periods

• Benefits range from $300 to $3,000

• Simple application process

• Quotes and policies only available through an agent

• No normal childbirth or pregnancy coverage

• No coverage for complications from cosmetic surgery

Founded in 1922, State Farm first set down roots in the auto insurance world. The company has since expanded, now offering a variety of insurance options to customers across the country, including short-term disability coverage.

State Farm currently holds an A++ financial strength rating from AM Best, the highest rating available. Their short-term disability insurance policies are offered in 47 states . They also boast a simple application process that provides you with coverage faster than ever.

Short-term disability insurance through State Farm provides between $300 and $3,000 in monthly coverage, depending on your occupation and current income, and elimination periods are 30, 60, or 90 days. Benefit periods are streamlined with either one- or three-year options available, but the latter earns them our review’s top spot if youre looking for longer coverage.