State mandated short term disability insurance programs often leave families with more questions than answers. Very few states have laws requiring the coverage.

All states provide income protection for on-the-job accidents in the form of workers compensation. But two holes remain: off the job accidents, and sicknesses are not included. This omission comes up frequently for families during maternity leave.

  • Which ones have mandates?
  • What are the limitations?
  • What are the alternatives for:
    • Individuals
    • Maternity leave
    • Off-the-job accidents

States with Laws Mandating Short Term Disability

State mandated short term disability insurance exists in five states. These states passed laws requiring the benefits. Forty five states do not have laws with mandates. Those that have mandate laws limit benefits and eligibility: hence the need for supplemental short term disability.

Eligibility

State programs do not automatically apply to every resident. Keep in mind that these programs apply based upon where you work, not where you live. If you commute out of state you may not be covered.

Government employees are often not included. If you work for the federal, state, county, or municipal government, you may not have coverage. Teachers are often government employees. People working in cash businesses may see lower levels of income replacement – because they may report lower income.

Limited Benefits

The five states with mandated temporary disability programs are: California, Hawaii, New Jersey, New York, and Rhode Island. While nice to have if you become disabled the benefit amounts may be limited in multiple ways.

The monthly benefit amount is limited by percentage which ranges from 50% to 66%. At minimum these levels leave workers with at least a 1/3 cut in take-home-pay.

The monthly benefit amount is also limited by a hard dollar cap. The amount of the hard dollar cap may increase each year, or stay the same for decades. Hard dollar caps limiting the monthly benefit amount start at $170 per week in New York. That amount is a mere pittance.

The monthly benefits amounts are also limited by the duration. Many people ask “how long does state short term disability last?” It lasts for 6 months in four states, and 12 months in California.

State benefits are often taxable. Each state varies how the premiums are paid. If benefits are taxed it lowers the amount of spendable income replacement received.

State Short Term Disability Alternatives

One of the most frequently searched terms online is: “Does my state offer state short term disability benefits?” Fill in the blank with any of the 45 other states. The answer is always no. Fortunately there are alternatives.

Individual Coverage

Every state allows people to purchase individual short term disability. Even those with mandates provide residents to purchase policies to increase the benefit amount, or extend the payment duration.

Maternity Leave

The people most often asking whether there is state mandated short term disability where they live are those needing the benefits. Growing families with income needs during maternity leave ask this question the most.

Most employers do not provide paid maternity leave. Only three states mandated paid parental leave as an extension of their state disability programs. Private short term disability for maternity leave provides a viable alternative.

Policies covering normal childbirth are only available as an employee benefit program. Only policies covering normal childbirth apply during most maternity leave situations. States do not require employers to offer the policies, but many employers elect to offer a voluntary option.

Unemployment

Part of the American Recovery and Reinvestment Act of 2009 provided incentives to expand unemployment compensation laws to include income replacement for a compelling family reason. In some states a spouse may be eligible for payments, while in others a worker’s own disability qualifies them for benefits.

Five states accepting federal government incentives chose to include a worker’s own disability as a compelling family reason. While not a traditional temporary disability plan, the government benefit may work the same way when workers lose their jobs. The states that support this definition include: Arkansas, Illinois, Maine, Minnesota, Texas, and Washington.

On the Job Accidents

All 50 states mandate temporary disability income replacement for on the job accidents and injuries. Medical care is often covered as well.

Permanent Disabilities

All 50 states administer Social Security Disability Insurance in partnership with the federal government. The program does not cover temporary disabilities. Contact the disabilities determination office in your state to apply for benefits. You disability must be expected to last for 12 months or longer, or result in death.

Non Mandated State Variations

Individual short term disability insurance is regulated at the state level. Each state insurance commission must approve the policy features, language, and qualifying conditions. As a result there may be minor state-based differences in how the policies work depending upon the state where you work.

Image credit: devke / 123RF Stock Photo

Posted