Employee Life and Disability Insurance

Short-Term Disability Insurance

Short-term disability plans provide a certain percentage of income when a disability prevents a person from working. Short-term coverage is usually group insurance. Disability can include illness or injury. Of course, this doesn't include on-the-job injuries since Workers' Compensation covers those.

Let’s take a look at a typical short-term disability policy:

Kate broke her arm when she fell in her driveway. Since Kate suffered an injury, her short-term disability benefits start immediately. Kate will receive a percentage of her salary spread out in weekly increments for 13 weeks. Typical policies offer income replacement percentages of 50%, 60% or 66 2/3% spread out in weekly increments that last for the benefit period, commonly 3 to 6 months.

Short-term disability insurance is usually purchased by a group and can be funded by the employer or the employee. Since group short-term disability policies are "guaranteed issue", there is no medical exam to enroll in an employer's short-term disability plan. After the completion of the waiting period, which is the period of time between the onset of a disability and the beginning of the benefit period, coverage will begin. Waiting periods may differ for illness or injury depending on policy provisions. The waiting period actually acts like a time-deductible. Here are some examples:

Billy broke his leg when he fell down a flight of stairs at home. His benefits start right away because he suffered an injury.

Jillian came down with pneumonia. She won’t receive her benefits for 1-14 days, depending on the policy. That’s because there has to be ample time to prove that Jillian’s illness is actually disabling. Some companies require their employees to use up all of their sick days prior to the start date of benefit payments.