What is Short-Term Disability Insurance?

Short-term disability insurance is an insurance product that provides income protection in the event of temporary disability, such as injury or illness. Some employers may offer this as part of their benefits package, while in other cases, employees will need to enroll independently if they want this kind of coverage. There are a number of kinds of policies available, and people may receive a discount for purchasing related insurance products at the same time, as in the case of someone buying long-term and short-term disability insurance together.

With short-term disability insurance, benefits kick in when a physician documents a disability and recommends time off from work. Usually, injuries or illnesses lasting less than 12 months are covered by this insurance product. The insurance provides a percentage of the pre-disability income, ranging from 40-65% with most insurance policies. This provides people with money to cover living expenses while they are unable to work due to a temporary disability.

Costs of short-term disability insurance policies vary. It is usually possible to negotiate a bulk rate for members of a workplace or professional organization, cutting down on costs significantly. People may pay annual, quarterly, or monthly premiums, depending on how the policy is structured. There is usually a waiting period before benefits kick in. Once an injury or illness develops, the beneficiary of the policy may need to wait a week before filing a claim, to confirm the nature of the disability.

When evaluating whether they need short-term disability insurance, people should consider whether they can cover their living expenses in the event of being unable to work for several weeks or months. Living expenses can include payments on loans, as well as basic supplies like food. If people suspect that they do not have enough money or would be forced to dip into retirement and other special savings accounts to survive, this insurance product may be a good idea.

If the disability becomes permanent, long-term disability insurance can provide income protection for the rest of what would have been the person's working life. This insurance only kicks in when a doctor certifies the permanence of the disability. Depending on the policy, if the person is able to work in other professions, the insurance may not provide income protection. Other policies are profession-specific; a doctor with long-term disability insurance, for example, can buy a policy specifically addressing loss of income as a result of not being able to work as a doctor.