What is Short-Term Disability Insurance?

A Definition of Short-Term Disability Insurance

A type of insurance that provides a monthly benefit if you become so sick or injured that you won’t be able to work for several weeks or months. Short-term disability insurance benefits typically replace about 70% of your income. This type of insurance is designed to provide income for a few weeks to a year. Your employer may offer short-term disability as part of your benefits package, and they may pay all or part of the premiums.

Disability insurance begins paying benefits after you use up your employer’s sick leave benefits.

If your employer does not offer short-term disability insurance and you don’t purchase an individual policy, you’ll have to reply on the government’s Employment Insurance (EI) sickness benefits, which are typically much lower than what a short-term disability policy would pay.

Example

Mrs. Fefflespeckle is in a car accident and has severe back pain that prevents her from doing her job as a warehouse manager. Because her employer provides short-term disability insurance, she doesn’t have to try to work through the pain and potentially worsen her condition. Instead, she can stay home and rest and go to physical therapy and focus on her recovery, because short-term disability insurance provides enough money to cover her living expenses and some of her medical bills. After submitting a claim with a physician’s statement of her disability diagnosis and prognosis, she receives her usual salary minus the usual payroll and benefit deductions.

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Tips From First Foundation

The price of your short-term disability policy will depend on the monthly benefit amount, how long benefits will last, and the waiting period before benefits become effective. You’ll receive weekly benefit payments for as long as you remain totally disabled and unable to work in your own occupation, until the policy runs out. The policy may require you to seek other jobs that you can perform while disabled, participate in rehabilitative therapy, and provide periodic updates on your recovery as a condition of continuing to receive benefits. If you receive workers’ compensation, your disability benefit may be reduced commensurately.

For more coverage, purchase a long-term disability insurance policy. It has a longer waiting period, typically 120 days, before benefits begin, but it provides a monthly benefit for as long as you are unable to work.

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Last updated Oct 29, 2018