If you are suddenly unable to go to your job and earn due to an accident or illness, short term disability insurance will help you replace a portion of your income during the initial time of your disability. This insurance can provide you with up to 60% of your income. Sometimes minor injuries can also affect your ability to work, and it becomes difficult to manage the household cost. It can add more stress to your mind, and you may take a long time to recover. In case, you are unable to get long-term disability insurance; short-term disability insurance can provide you with the financial support you need.
Let’s take a closer look at what short term disability insurance is and how it can benefit you.
Short term Disability Insurance
A short term disability insurance replaces a portion of your income if you experience temporary illness or injury. For instance, breaking a hand, the birth of a child, joint disorders or digestive disorders can stop you from going to the workplace. Such insurance policies pay benefits for a short amount of time, usually from three months to a year. Typically, it is paid in part or in full by the employer to benefit its employees. This insurance can help you stay on top of your household bills, medical costs and other daily expenses as it replaces a percentage of your regular income.
How Does Short term Disability Insurance Work?
Short term disability insurance is designed to benefit both the employee and the employer when an employee is unable to do the job because of an injury or illness. If an unwanted event happens, you can file a claim with a disability insurance company. If the company finds that you qualify for this insurance, you will typically be reimbursed for about 40 to 70% of your lost wages. This percentage varies from company to company. Before the benefits of short term disability insurance start, there is a waiting period that can vary from one week to one month. The benefits of this insurance policy last around three months to a year. However, some companies provide these benefits even for two years. It will help to protect the employee from financial difficulties during the recovery period.
Who Provides Short Term Disability Insurance?
Your employer may offer you short term disability insurance. However, the companies are not legally bound to provide this insurance to their employees. Your employer may provide this or work with an insurance company to provide you with this benefit. If your employer does not offer you this insurance, you can privately purchase it but it will be at a pretty high price. The cost varies with the level of benefits and your age. Typically, you have to pay between 1 to 3% of your annual gross income. You can purchase it by visiting an insurance provider who is licensed to provide disability insurance.
How To Apply?
If your employer provides you shortterm disability insurance, then you should contact the human resources department of your company. They will review your documentation and contact the short term disability vendor. Some companies require their employees to use available sick days before the insurance begins. Others ask you to show a note from your physician before approving the insurance. Once you complete the insurance claim and provide necessary documents, they submit it to the insurance provider, and you will access the benefits. If you have purchased private insurance, you have to inform your insurance provider about your disability to start getting financial help.
What Is Not Covered Under Short Term Disability Insurance?
Your short term disability insurance may have some exclusions. These exclusions are written on your policy contract and varies from company to company. Some common situations that are not covered in short-term disability insurance include:
- Intentionally self-caused injuries.
- Active participation in riots.
- An accident resulting from alcohol or drug abuse.
- Loss of professional certificate or license.
- A job-related injury that is covered by workers compensation.
- Injury as a result of criminal activity.
- Any act of war
Moreover, short term disability insurance companies disqualify individuals having pre-existing conditions. These conditions include:
- Heart disease
- Neurological disorders
Is Short term Disability Insurance Taxable?
It depends on how you pay for your disability plan. Most of the employer’s disability plans are pre-taxed. Either the employees directly pay the tax, or it is deducted through the payroll. In this case, you will receive a tax-free payment from your disability insurance. However, if you purchase private disability insurance, you must consult a tax advisor about the tax treatment and benefits of disability insurance.
Why You Need Shortterm Disability Insurance
The main advantage of getting this type of insurance is that you are mentally relaxed about your financial commitments. It takes care of your expenses when you are unable to work because of injury or illness for several months. It will also help you to concentrate on getting back to full health without the stress of unexpected financial hardships.
Drawbacks Of Short term Disability Insurance
Shortterm disability insurance has some drawbacks, such as the benefits of this insurance ends within months and leave the disabled individuals on their own. These policies have fewer protections and options payouts under certain conditions, such as when a policyholder becomes disable near his retirement age. To avoid such inconveniences, you need a more comprehensive policy that offers an unlimited payout period.