If you suddenly become injured or sick and can’t work for several weeks, do you have enough money in savings to supplement your earnings? With economy as it is today, few people can actually answer yes to that question, so it's a good idea to have some sort of short-term disability insurance as a safety net. Below are some basics on short-term disability insurance.
What Short-Term Disability Insurance Is
Short-term disability insurance is a type of insurance that provides you with a portion of your regular income while you are unable to work due to an illness or accident. However, if employees have sick days, they may be required to use those up first before they can receive money from the short-term disability insurance.
How Much Does it Pay?
The amount that the short-term disability insurance pays can vary, depending on the policy and its limitations. As a general rule, the amount the individual gets may be anywhere from 30% to 70% of their gross income.
Who Pays for It?
Short-term disability insurance may be paid for by the employer, employee or both. However, employers generally pay for at least part of this insurance and offer it as a company benefit. An individual who is not employed, someone who is self-employed, for example, may also purchase their own short-term disability insurance.
Are Short-Term Disability Payments Taxable?
The tax status of disability insurance payments may differ depending on the type of policy and who is paying for the policy. If you’ve purchased the policy on your own and make all the payments on the policy using your income that was already taxed, the benefits are not taxable.
If you chose to have the premiums taken out of your paycheck on a pre-tax basis, you may have to pay taxes on the money. In an employer-paid policy, you will have to pay taxes on the money if the employer does not include the payments as part of your wages.
How Long Does it Last?
Short-term disability insurance can last anywhere from 10 to 26 weeks, depending on the plan. Beyond that point, you would need long-term disability insurance to protect you.
What Are the Eligibility Requirements?
As a recipient of an employer-paid short-term disability plan, you are usually required to meet certain requirements to be eligible for short-term disability payments. Keeping in mind that these may vary by the policy and by the employer who is paying for the policy, here are some basic guidelines.
- You must be a full-time employee who works at least 30 hours per week
- You must have either an illness or accident that prevents you from working.
- You must provide proof of disability in the form of a completed form by your physician.
- For an illness-related claim, you may have to be sick for 14 days before the insurance will start paying.
- For an injury-related claim, payment usually starts on the first day; however, you must be disabled for a certain number of consecutive days before the policy will begin to pay, and then they go back to the first day you were injured.
