Short Term Disability Benefits
Short Term Disability: Benefits, Definitions, Eligibility
Short term disability benefits vary based upon how your policy is configured, the contract definitions, eligibility requirements, and amount of income replaced. Pay careful attention to policy definitions and eligibility criteria as they vary widely between insurance companies.
Short Term Disability Benefits: Policy Definitions
Short term disability benefits are derived in part by the policy definitions: elimination or waiting period, payment duration, the definition of disability, and riders that may be attached to your contract.
Many policy variations become important based upon who is buying the policy and why. Explore the topics pertaining to your situation.
Elimination and Waiting Periods
The short term disability elimination period determines how quickly your payments begin once you are unable to work. The shorter the elimination period, the more quickly payments begin, and the higher your monthly premium.
The short term disability payment duration determines how long the policy will continue to make payments during the time you are unable to work due to a covered medical condition. You can elect benefit durations of 3 months, 6 months, 12 months, and 24 months.
Policy definitions may have a profound impact on the amounts paid by your insurance contract. It pays to understand these concepts when applying for coverage, that way there are no unpleasant surprises when you need to make a claim. We use some hypothetical examples for women during pregnancy to illustrate the possible impact.
The definitions for total and partial disability will vary by insurance carrier. In general being totally disabled means you are unable to perform the duties of your regular job. Partial disability can be defined as you inability to work more than 20 hours per week at your full time occupation. During pregnancy, many women may need to cut back on the hours worked.
Partial payments are most commonly paid only after being declared totally disabled first. If your doctor ordered bed rest to stabilize your health, than allows you to return to work on a part time basis, then the partial amount may be payable.
Recurrent disabilities occur when you stop working, then return to work full time, and then need to stop working again. This is common for women suffering from chronic illnesses. Autoimmune disorders fit this description, and women are far more likely than men to suffer from this condition. Also during pregnancy, it is not uncommon to stop, start, and then stop working again, etc.
Recurrent disabilities may be treated as a new or continuation of an existing condition depending upon the circumstances. A new disability resets both your elimination period, and payment duration.
Short term disability riders are addendums to programs that alter the way the contract works. It allows the individual to tailor the policy to their unique needs. Wellness riders provide a monetary incentive for policyholders to get regular medical checkups, and catch any health issues in a more treatable stage.
Most commonly a rider is issued to exclude an existing health condition from being a covered for a specified period of time. A cancer survivor might get a policy that excludes unemployment due to a return of the cancer until five years after the last treatment date. A person who recently underwent knee surgery might accept a rider excluding a recurrence of the knee injury. Riders allow modified policies to be issued that might otherwise be declined.
Benefits are available only if you meet the eligibility criteria. Do you qualify for coverage, and if covered does your medical event qualify for claims payments, and if so how much? These questions are answered in part by: occupation class, medical criteria, qualifying conditions, and income limits and offsets.
Occupation class is an important eligibility requirement. Sometimes insurance companies will consider both occupation and the industry of employer.
White collar occupation classes are considered to be lower in risk than other occupations. A person sitting behind a desk is far less likely to miss work due to an injury or illness. People working as computer analysts, executives, and in administrative roles pay the lowest rates, and qualify for coverage most easily. Those in more dangerous occupation classes pay higher rates, and find it more difficult to qualify: chiropractors, mine workers, airline pilots, etc.
The industry of your employer is a key eligibility requirement for contracts sold at the worksite. Some high risk industries are excluded altogether, while others have rate assignments based upon risk and turnover ratios.
Insurance companies all have unique health and underwriting criteria: another important short term disability eligibility criteria. Every company will ask medical questions to determine if you are healthy enough to be an insurable risk. Medical criteria vary based upon monthly benefit amount, where and how you buy your policy.
The greater the monthly level of income replacement requested, the more stringent the medical criteria. Underwriters want more health information when asked to take bigger risk. You might experience simplified underwriting when requesting a policy paying $3,000 per month, and full underwriting when applying for $5,000 per month or more.
When purchasing a contract in a worksite environment health underwriting criteria is often more streamlined as risks can be pooled with co-workers, and employers want workers to keep productive, rather than answering detailed medical questions with an agent. Guarantee issue is often available to groups when multiple employees participate.
Qualifying conditions are another important eligibility criteria. What medical conditions qualify you to file a claim and receive a benefit payment?
Qualifying conditions typically consist of covered accidents and illnesses that prevent the insured from performing the full time duties of their primary occupation. A policy will provide a list of excluded conditions such as: pre-existing conditions, addictions, aviation, committing a crime, mental disorders, etc.
Consider knee surgery as an example. If you require surgery on a knee due to a covered accident after your policy start date, the surgery would probably be a covered benefit provided you were unable to work while in recovery.
Many knee replacement surgeries are anticipated. You experience pain for years before going under the knife. A policy with a twelve month pre-existing condition clause would rule out the surgery as a qualifying condition during the first twelve months of the policy. On day 366 your knee replacement surgery might qualify.
Income Limits and Offsets
Income limits and offsets are the final eligibility requirement to be explored. In most cases a policy will replace up to two thirds of income, up to a set limit of $5,000 per month. Offsets will reduce the amount of coverage you may be able to purchase.
Most policies will consider income from your primary occupation exclusively. Policyholders with a second job sometimes do not get the same level of income replacement. Income from overtime, commissions, bonuses, and other forms of variable pay are often excluded.
Your level of income replacement may be offset by other contracts you might already have in force. The purpose is to make certain that you are not over-insured. Both your employer and the insurance company want to avoid having you take home more money while you are unemployed, then while you are working. Your income limit may be reduced or offset by any state plans, group plans, or individual coverage already in force.