Short Term Disability Insurance – What To Know
Do You Need Short Term Disability Insurance?
In the US, we spend a lot of time talking about health insurance, but what about policies that will help replace some of our incomes if we become disabled for a few weeks to a few months, and so we cannot work and make an income?
Of course, all the experts will publish the very good advice that we should have enough money saved to cover our bills for 6 – 12 months. However, the current economic situation, or just a bit of over-optimism, makes this impossible for a lot of workers today.
Can You Cope With A Short Term Income Loss Because You Cannot Work?
If you lost your income for a few weeks to a few months, would you start missing payments? For many Americans, the answer is yes. According the reports in this article, half of Americans says they cannot raise $2,000 in 30 days. Can you? If you missed your next paycheck, or your next 3 paychecks, would your mortgage, car payment, and utility bills start to be late?
Short Term Disability Insurance
Your job may offer short term disability (STD) insurance, or you may be able to purchase individual disability insurance through an agent or online. Depending upon your own personal situation, this could be a prudent move.
Will Long Term Disability Insurance Or Social Security Be Enough?
You may have long term disability insurance, but it will probably also have a longer waiting period before you can qualify for payments. You may think you can qualify for social security payments, but it is hard to qualify, and you will absolutely have a long waiting period before you can collect checks!
A typical short term policy will have a fairly short waiting period, and will be intended to cover a short term income loss. Policies differ, but here are some things that may be covered.
- You or your spouse plan to have a baby, and will be out of work for 6 weeks with the new baby. In addition, there could be a complication, and a pregnant woman may need to leave her job some weeks before the baby is born.
- You get the flu, and you have to stay home for two weeks until you completely recover. If your policy has a very short, or no, waiting period, you could collect for this.
- You break a limb, and cannot function at your current job for several weeks.
Your good health insurance plan may cover a lot of the medical bills, but it will probably not give you an income. That is the difference between medical insurance and disability insurance.
Typical Short Term Disability Waiting And Coverage Periods
Again, policies are all different. The longer the policy will cover you, the shorter the waiting period, and the more it pays, the more it will cost. Also, your premiums may depend upon your current health and age, so that will be similar to major medical.
A typical waiting period could be 7, 15, 21, 30 or 60 days. Contrast that to typical long term care disability waiting periods which may be 90 – 180 days. With a 7 day waiting period, you could qualify for payments by your second week out of work.
If your job already provides you with a certain amount of sick leave, say 15 days, then you could choose a longer waiting period to save more money on your premiums. The idea is to get your policy to start paying after your sick leave runs out!
How long will you be able to collect payments? Again, you have to choose a coverage period. A policy may cover you from a few weeks to several months. Many people choose to select a coverage period that will end when long term coverage would start.
How Much Will The Policy Pay? You will select a payment amount. Typically, this is set to some percentage of your current income up to a maximum allowed by the policy. If you make $4,000 a month, you may be able to choose a policy that will pay sixty percent of that. This would work out to be $2,400.
How Much Does Short Term Disability Insurance Cost?
Your price will vary by location, company, features, benefit lengths, waiting periods, and coverage amounts. This is similar to any other type of insurance policy you buy. Your age and current health could also affect your premiums. The type of work you do may place you in a higher or lower risk category, and some companies may also base their price on this.
You can by individual short term disability insurance, or you may get it from your current employer. Most employers will require their employees to pay some, or all of, the premiums.
Can you deduct the premiums?
In most cases, at the current time, you do not deduct these premiums. However, your claim payments are also not a taxable event. These laws change all the time, and your situation could be unique – so please consult a tax professional or do your own research. The IRS keeps a page updated on deducting disability insurance.
Where Can You Buy STD?
If you do not have an employer based STD plan, you may want to get individual disability insurance quotes from a good insurance agent or an online insurance quote form. Be sure to compare plans and premiums for a few different companies!
- Many agents that sell life insurance also sell disability policies.
- You may also be able to purchase disability coverage as a rider to a life insurance policy. This can be a convenient way to purchase the coverage you want.
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