What Is Short Term Disability Insurance?

By Robert Bennett , last updated October 13, 2011
Short term disability insurance is a type of insurance policy that helps individuals at a time when they are temporarily unable to work due to illness, injury or accident. When someone is covered under a short term disability policy the policy will pay a percentage of an employee’s salary for a specified number of weeks when they are unable to work due to certain conditions. Short term disability does not cover someone for a work related accident or injury.
Some employers pay the full amount or part of the premiums while other employers provide the employees the option of purchasing a policy provided by the company as part of their benefits package. Employees can pay for the policy through payroll deductions. For employees who do not have the option of purchasing a short term disability plan from their employer can purchase a plan through an insurance agent. Generally, short term disability is an employer-paid benefit.
All short term disability plans specify certain conditions regarding eligibility for receiving benefits. For example, some employers require six months of full-time employment before they are eligible for benefits. Employers can also dictate the percentage of the weekly salary to be paid. Typically the percentage is between 50 and 70% of an employee’s weekly salary. The duration of short term disability is also dictated by the employer. Some plans pay for only ten weeks while others pay for up to 26 weeks.
Coverage can start anywhere from one to 14 days after an employee is unable to work. Many times, employers require employees to utilize all their sick or vacation time before short term disability benefits begin. The actual time for coverage to begin depends on whether you are out due to an illness or injury. Generally, if you suffered an injury, the benefits will start immediately. For illness it may take longer because you will need to prove the illness is enough to be disabling.
For example, say Joan is on maternity leave. She normally earns $1,000 per week in salary. Joan will have to use 5 days of sick time before her short term disability takes effect. Payments from her short term disability plan will be 70% of her weekly salary or $700 per week for the six weeks she is out. Our poor friend, Stan fell off a ladder while painting his house. He was rushed to the hospital and is expected to be there for a while. Stan normally earns $800 per week. Since Stan is eligible for short term disability benefits through his employer he will receive a check for $560 without a waiting period.
Every policy is different so it is important to review the terms and conditions of your short term disability insurance. Be aware that each employer is allowed to place restrictions on short term disability benefits. Also know that short term disability is not a required in most states. Many employers also require documentation of illness or injury before benefits are released.
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