Many parents are confused about how short-term disability insurance works for good reason. The topic is confusing. In addition, each person will have a very different experience based on where he or she lives and/or works.
Do not assume that you automatically have coverage as with Social Security disability – which does not cover temporary medical conditions.
Request a quote for an individual policy and buy the coverage through a licensed agent in your state before becoming sick, hurt, or pregnant. Avoid the common pitfall of lost income with few alternatives for financial assistance.
What is Short-Term Disability?
Short-term disability is an insurance policy that replaces a portion of income in case a person is unable to work because of a covered accident or illness. Most employers do not provide paid leave for employees, and FMLA is unpaid.
Parents may have this coverage via one of three channels.
- State temporary disability programs exist in only five states: California, Hawaii, New Jersey, New York, and Rhode Island
- Group or personal plans through work are available in all 50 states although employers are not required to offer this benefit
- Individual programs purchased privately are available across the nation to people before they become sick, hurt, or pregnant
When Can You Use the Policy?
You can use a short-term disability (file a claim – provided you actually have the coverage) after you suffer covered accident or illness that prevents you from performing the duties of your full-time occupation. A licensed doctor must certify the medical reason you cannot work.
The most common questions about qualifying medical conditions fall into two categories.
- Pre-existing condition exclusions prevent many from using the policy during the first year after the effective date
- Pregnancy and maternity leave use depends on whether mom bought the coverage through work or via private channels
How to Apply for Benefits?
The biggest misunderstanding relates to applying for short-term disability benefits. Many people mistakenly assume that their state provides a program when only five do. You cannot file a claim for coverage you do not have.
If you do have coverage, contact the insurance company or state agency administering the program for instructions. Typically, both your employer and doctor will need to sign the claim form.
How Much Does it Pay?
The monthly amount that short-term disability pays depends on the income level of the affected person and three common features.
- The waiting or elimination period determines when claim payments begin after a covered loss
- The monthly percentage amount can reach as high as 66-70% of income and varies for each policy as the premium costs rise as the benefit increases
- A maximum monthly amount is a hard dollar cap that limits what the insurance company pays regardless of the person’s income level: $5,000 – $7,500 is the most common range
How Long Do Benefits Last?
Short-term disability claim payments last until the person can resume working or the timeframe reaches the end of the stated benefit period – whichever occurs first.
- Resume working means that the person recovered from the accident or illness and can perform the duties of his or her full-time occupation
- The benefit period determines how long the claim payments last while the covered person remains disabled and is different for every policy: 3, 6, 12, 24 months are most common