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Benefits and Costs of a State Disability Insurance Plan

State Disability Insurance Programs

There are a number of U.S. states offering state disability insurance programs. These are established by the states through a statutory disability program commonly called disability insurance. These programs are funded through the mandatory contributions of all employees of the state and optionally by employers. The contributions of employees to the program are federal tax-deductible but the rules are different from state to state.

Employees’ contributions to disability insurance programs are collected by the state through a state disability insurance tax so that the state in turn can offer tax-free income replacement of up to more than half of an employee’s average weekly income. The benefits become available to the employee a number of days after the disability and will continue for up to 52 weeks if the worker paid their state disability insurance taxes. The disability benefit pays out for 39 weeks if the employee has voluntary self-employment coverage. Employees can claim a deductible on federal returns for their disability benefit as this is considered a state income tax.

Family Temporary Disability Insurance

Some states also offer Family Temporary Disability Insurance to people who need to take time off from work to provide care for a sick relative or stay with a new born child.

State Disability Insurance

State disability insurance aims to provide partial wage-replacement insurance for employees who become disabled. This insurance program is mandated by the state and funded through payroll deductions. The benefits it provides are affordable and short-term for all eligible workers. Apart from state disability insurance, employees will also be covered by Paid Family Leave insurance.

Filing a Claim

In the states offering state disability insurance, filing a claim can be done online or via snail mail. Filing a claim online would require the worker’s registration to a government website. Upon registration, workers will be able to file their claim, gain access to personal claim information as well as see payment history.

If you plan to make your disability insurance by mail, you can download the Claim for Disability Insurance Benefit form from the state government website where you can also find guidance on completing and filing the claim form.

Eligibility for State Disability Insurance

Employees who miss out on receiving their wages for being disabled due to a non-work-related injury or illness, childbirth or pregnancy, may claim for disability benefits. There are certain conditions where an employee may be eligible for disability benefits including:

  • The employee must be unable to carry on with his regular work for eight straight days
  • The employee must be employed or actively seeking employment at the time of the disability
  • The employee must have missed out on their regular wages due to the disability
  • The employee must have earned $300 from which the State Disability Insurance deductions were taken
  • The employee must be under the treatment and care of a licensed physician in the first eight days of the disability
  • The employee must be able to mail their claim within 49 days of the date of the disability
  • The employee’s physician must complete a medical certification outlining your disability
  • Keep in mind that if the employee’s spouse, parent, registered domestic partner, or child is the primary care giver for the disabled employee, they may be eligible for Paid Family Leave benefits.

Under the state disability insurance an independent medical examination may be required in order to determine the initial or the continuing eligibility.

Ineligibility for State Disability Insurance

Employees will receive a notification of ineligibility stating the reasons if the state finds that they are ineligible for the benefit. This usually happens when these scenarios are present during the disability:

  • The employee is not suffering from lost income
  • The employee is receiving benefits from Family Temporary Disability or Unemployment Insurance plans
  • The disability occurred when the employee was committing a crime that will result in a felony conviction
  • The employee is in prison, recovery home, jail, or other places serving time for being convicted of a crime
  • The employee is already receiving workers’ compensation payouts on a weekly rate that is equal or greater than the state disability insurance rate
  • The employee was unable to undergo an independent medical examination when you were told to do so.