A Short-Term Disability Insurance Overview
Disability insurance is a type of insurance that covers the insured when they become unable to work due to a long-term injury or illness. Disability coverage can be bundled with health and life insurance to offer more benefits for employees. It is also often employed as an important aspect of a business continuation plan or a risk management plan for small to medium businesses.
Disability insurance policies work in pretty much the same manner. After the employee is injured or acquires an illness, there is usually a waiting period when no benefits are to be paid. During the waiting period, the physician treating the insured will make a determination about the patient’s condition. This determination has to do with the permanency of the illness or the injury, or how long the insured’s condition will affect their ability to perform their tasks at work. The disability policy outlines in detail the required proof of permanency.
Disability insurance premiums are based on a number of factors including the age and nature of work of the insured as well as other risk factors such as the insured’s health and lifestyle. To illustrate, an office staff has a lower risk of disability than a building maintenance staff and so their disability insurance premium will be lower.
Short-term disability insurance provides coverage for short-term but disabling illnesses or injuries. The waiting period for this policy is anywhere between 14 to 21 days. This policy usually pays benefits for a short period of time and the benefit is designed in such a manner as to provide just enough coverage to nurse the person back to work. Short term disability policies will usually pay benefits for up to three years.
Employees who suddenly get ill or injured off duty can benefit from a short term disability program. The disability insurance will pay a portion of the injured employee’s wages for a fixed amount of time, provided a physician has declared that they will be unable to perform the tasks of their job. The insurance coverage will commence from one to 14 days after the employee falls into a condition that will leave them unable to do their work. In most cases, the workers must exhaust their sick leave benefits first before short term disability insurance commences, provided that the illness will prevent them from coming to work for an extended period of time. This is the reason why there usually is a separate short term disability policy for sickness and for injury.
Who Foots the Bill?
The premiums for a short term disability insurance policy can be shouldered entirely by the employer, shared between the employer and employee or paid wholly by the employee. Most of the time, it is the company that pays for the short term disability insurance premium. Certain cases where employees are asked to pay for this policy is when they may benefit from the tax implications. A group coverage for short term disability is obtained through contract agreement entered into by the company with an insurer and through a self-funded plan that the employer sets aside.
The employer has the freedom to draft a policy which stipulates that employees exhaust all their sick leaves first before applying for short term disability benefits for an extended injury or illness. The company can also require documentation proving the permanence of the injury or illness and the employee’s inability to perform his tasks at work. Different short term disability insurance plans have various qualification requirements such as the active work requirement or the number of hours that an employee must work weekly and the years of service requirement, where the employee has to be hired for a certain amount of period.
A typical short term disability insurance plan benefit may include a percentage of the employee’s weekly salary, which is typically about 50% to 70% of the weekly pay, between 10 to 26 weeks of paid leaves, or the maximum amount of time that is covered under this disability plan.
Short term disability rules differ by states. There are some states that do not require short term disability and there are those who do, including New York, New Jersey, Hawaii, and Rhode Island. There are companies who also offer long-term disability plans in case the short-term plan benefits have been depleted and the employee is still unable to return to work.