If you’re injured and can’t go to work, how would you pay your bills during that time? What if you were to experience a temporary illness that kept you from going to work?
In your workplace, you may have heard of short-term disability insurance or STDI, but it could be something you overlook or think you don’t need. Is that a mistake?
Short-term disability insurance can replace your income for a brief period if you experience a disability. The period is usually anywhere from three to six months.
If you consider the fact that one in four workers will experience a period of disability before retirement and also that nearly 50% of Americans wouldn’t be able to cover a $400 emergency expense without a credit card, short-term disability insurance can start to seem like a good idea.
The following are some things to know.
What Is Short-Term Disability Insurance
As was mentioned, short-term disability insurance provides a benefit period that usually ranges from three to six months.A disability is any medical condition preventing you from working. This doesn’t mean that you have a workplace accident. It can be from a chronic condition such as a back injury or cancer. Some employers may also categorize pregnancy as a disability, so you might be able to use a policy for income while you’re on leave.
Most of these STDI plans will cover up to 80% of your gross income—although some will only cover up to 60% of your gross income, and most have a dollar limit.
Another option is long-term disability insurance. Long-term disability insurance requires a waiting period that’s usually 90 days but can sometimes be almost a year. Long-term disability insurance can also be used for years.
Your premium determines your benefit term, so the longer your benefit term, the higher your premium will be.
How Much Does Short-Term Insurance Cost?
Disability premiums for either short- or long-term coverage can range from 1% to 3% of your yearly income. If you made $50,000 a year, you paid $60 to $125 a month.Other factors aside from the benefit period that play a role in the cost of your insurance include your age, how much money you make, what your job is, and if you smoke.
If you work in a high-risk position, you’ll generally pay more for disability insurance.
What’s Not Covered?
While we often think about what is covered by disability insurance, sometimes it’s better to start by understanding what’s not covered.Disability insurance’s only purpose is to replace some of your lost income. It’s not going to cover long-term care or medical expenses. Also, even though pregnancy itself typically isn’t covered by disability insurance, if there are complications, such as having a lengthy recovery period following a C-section, you may qualify for benefits. Still, you must have been paying for the policy before you got pregnant.
Sometimes, mental health issues may be covered by short-term disability insurance. Still, you would probably need proof that it was a health issue that you were dealing with for a long time, such as ongoing records with a psychiatrist.
Should You Get Short-Term Disability Insurance?
Some employers provide short-term disability insurance or long-term disability insurance. If it’s available, you might consider it. If this kind of insurance is available through your employer and it’s free or low-cost, it can be a good idea.However, purchasing private short-term disability insurance may not be worth the cost. It is expensive, and there’s usually a better option. Instead of purchasing short-term disability insurance, you might want to put that money in a self-managed emergency account.
In terms of disability insurance, long-term coverage is going to offer you more protection and maybe more with your money. If you buy your long-term private disability insurance, you can take it with you even if you leave your current job.
To sum it up, if your employer offers free or low-cost disability insurance, it’s a good idea. Otherwise, paying for short-term disability insurance may not be your best option, but you could start comparison shopping for long-term insurance.
Regardless of your option, you should have a plan for what would happen if you could not work for some time, even if you’re relatively young.
