How Does Short-Term Disability Insurance Work?

People tend to ask how short-term disability insurance works when they are shopping for a new policy, or when they are filing a claim for benefits.

We tend to think about other things in between those two times.

If you are buying a new short-term disability policy, you will want to know how much it costs, where to make your purchase, when the timing is right, and how payment choices affect taxes.

If you are filing a short-term disability claim, it will be important to know how to apply, when it kicks in, how much it pays, how long it lasts, what it covers, and how it plays with FMLA.

Buying Short-Term Disability Policies

It is very important to understand how short-term disability insurance works when first buying a policy. You need to know the basics and the subtleties in order to make an informed decision.

Do your homework now so that you have no regrets in the event of a claim. Make the policy affordable to that you obtain coverage in time instead of kicking the can down the road.

How Much Does it Cost

Learning how much short-term disability insurance costs is the best way to understand how this type of coverage works. First, play around with our premium estimator to see how three features affect costs. Then, request an exact quote from a licensed agent for the configuration that fits your needs and budget.

Three core features impact premiums and comes into play in the event of a claim (see below).

  1. Elimination period: how quickly claim payments begin
  2. Benefit period: how long claims payment may last
  3. Monthly benefit: how much the policy pays

Where to Purchase

Short-term disability insurance works differently depending on where you go to purchase your policy. You have a choice between convenience and access versus better benefits. In the event of a claim, people always prefer the best coverage.

  • Individual plans bought outside of employer groups offer convenience and access. However, women planning a pregnancy later discover that individual policies do not cover their recovery from normal labor and delivery.
  • Personal and group policies obtained through employers offer the best benefits. Women planning to conceive should enjoy coverage for their normal labor and delivery. However, many employers do not make the option available to teachers, federal employees, nurses, or other groups.
  • State temporary disability programs exist in only 5 states (California, Hawaii, New Jersey, New York, and Rhode Island). People employed in the 45 other states must purchase coverage on their own.

When to Buy

Short-term disability also works differently depending on the timing of your purchase. Too many people wait until it is too late to begin shopping around. Things turn out much better when you act before the need arises rather than after.

  • You must show evidence of good health in order to buy a new policy. A licensed insurance agent will ask you a series of questions about your medical history. The company will decline many applications from people whose poor health is likely to cause a claim.
  • Pre-existing health conditions will be excluded for at least 12 months. Many people are healthy enough to qualify for a new policy – yet they have a hidden reason to obtain coverage. For example, pregnant women often are healthy enough to enroll. However, the new plan will not cover her maternity leave.

With Taxes

Learning how short-term disability insurance works with taxes before deciding how to pay the premiums. You must choose between the certainty of saving money upfront on the premiums or having a tax-free benefit in the uncertain event of a claim in the future.

  • The benefit is taxable when filing a claim if you pay the premiums using pre-tax deductions or if your employer pays the premiums on your behalf. You save money upfront.
  • The benefit is tax-free when filing a claim in the future if you pay the premiums using post-tax money. This option works best for women planning a pregnancy as the chances of using the coverage is very high.

Filing Short-Term Disability Claims

People often have the keenest interest in how short-term disability insurance works in the event of a claim. Every penny counts when you cannot perform your job duties and your employer stops sending you paychecks.

In most cases, short-term disability helps people who buy a policy on their own before becoming sick, hurt, or pregnant. Only 5 of 50 states have a mandatory program addressing temporary disabilities.

How to Apply

Short-term disability insurance works by filing a claim form with the issuing company or sponsoring government agency after you become unable to perform your full-time job duties. You must have coverage in force at the time your illness begins or accident happens in order to apply for benefits.

Apply for benefits with the private company issuing your policy. Download the claim form from their website. Your employer and doctor must sign the form prior to submission. Follow the instructions carefully to avoid delays in the arrival of your benefit check.

When it Kicks In

The elimination or waiting period determines how short-term disability insurance works in relation to when the benefits kick in. You must be unable to perform the duties of your full-time occupation for a set number of days before the claim payments can begin.

Your policy may have separate elimination periods for accidents and illnesses.

  • 0 days waiting for accidents is the shortest option
  • 7 days waiting for sickness is the shortest option

Other options that you can choose at enrollment time include 14, 30, 60, or 90 days.

How Much it Pays

The monthly benefit amount determines how short-term disability insurance works in relation to how much the policy pays – after you satisfy the elimination period. You pick the monthly amount when first enrolling, or your state makes the decision for you. Cost and your income at that point in time both come into play.

  • Higher monthly amounts raise premium rates. Many people choose lower amounts to cut expense, and then come to regret that choice when they file a claim.
  • The insurance company places two limits on the amount. The lesser of the two numbers determine how much the policy will pay monthly.
    • Up to 66% or 70% of gross monthly earnings
    • Hard dollar cap of $5,500 to $6,500 per month

Length of Payments

The benefit period is one of two primary factors determining how short-term disability insurance works in relation to how long the benefits last – after you satisfy the elimination period. You also pick the benefit period when first enrolling, or your state makes the decision for you.

  • Benefits will last no longer than the policy benefit period
    • 3 months
    • 6 months
    • 12 months
    • 24 months
  • Claim payments last no longer than the duration of your disability

The lesser of these two different time spans determines how long the insurance company will continue sending checks. Budget accordingly.

What it Covers?

People often ask how short-term disability benefits work in relation to medical conditions. In general, a covered accident or illness will meet four basic criteria. You must meet each of these four rules to have a valid claim.

  1. Occurred after the effective date
  2. Happened while the policy is in force
  3. Causes a loss of income
  4. Not listed or excluded by name in the contract

In addition, you need to apply these four rules to the three main policy features (elimination period, benefit period, and monthly amount) to determine how the coverage works for specific situations.

  • Pregnancy or maternity leave
  • Mental health
  • Recovery from surgery
  • Other injuries or sicknesses


People also ask how short-term disability insurance works with the Family Medical Leave Act (FMLA). The two programs frequently come into play when you are physically unable to perform your job duties and must take time off to recover.

  • FMLA is a federal regulation that provides up to 12 weeks of unpaid job-protected leave from the job. Only eligible employees at covered employers enjoy these legal job safeguards.
  • Short-term disability is an insurance policy that replaces a portion of income during the time you are unable to perform the duties of your full-time job. Only people with coverage in force enjoy these income benefits.