Some people receive short-term disability (STD) coverage through their employer, union, or other professional organization. This type of policy is known as group coverage. You can also purchase individual coverage directly from an insurance company or agent.
The general design of an STD policy
Most STD policies have the same design. You, or your employer, pay a monthly premium for coverage. When you are unable to work due to illness or injury, you apply through your Human Resources representative or insurance agent. Most STD policies require your doctor to provide a document explaining your medical condition and estimating how long you will be unable to work. Surely there will be a waiting period between the date you leave your job and the date you receive your benefits. Many policies also require you to use some or all of the sick leave days to which you are entitled before you start getting paid. After the waiting period is over, you will receive a fixed percentage of the salary you earned before becoming disabled. For example, if you were paid $500 per week and your policy pays you 50% of pre-disability earned income, you would receive a benefit of $250 per week. Short-term policies generally last between 9 and 52 weeks, after which the benefit ends. At that time, you have the option of opting for a long-term disability policy or applying for Social Security Disability Insurance.
Differences between the policies
All STD policies have these same general characteristics, however, each one has its particularities.
- Definition of Disability: Some STD policies define disability in terms of the inability to do your work. These are known as “own occupation” definitions of disability. Other policies define disability as an inability to perform any work, which is known as the “any occupation” definition. In general, policies with the “any occupation” definition are less expensive.
- Minimum Seniority Requirements: Some employers only provide STD policies after you complete a set period of employment, such as one year. Some policies also pay higher benefits to workers who have been with the company for longer periods.
- Waiting Period: Waiting periods can be up to 180 days. In general, policies with longer waiting periods are cheaper. Many plans have different waiting periods for different types of disabilities. For example, a plan may have a 7-day waiting period for illnesses and no waiting period for accidents.
- Benefit Rates: Benefit rates vary, but are generally in the range of 40-70% of your pre-disability earned income. You will surely have to pay a higher premium for a higher rate. Some policies also change rates during the benefit period. For example, your policy pays 80% for the first three weeks of disability and then pays 50% for the rest of the benefit period.
- Partial Disability: Some plans allow you to return to work part-time while continuing to collect the benefit. This is often referred to as a “residual” or “lost income” benefit. For example, if you worked 8 hours a day before your disability, and can return to work 4 hours a day, the STD policy may replace part of your earnings for the remaining 4 hours.
- Benefit Periods: Some plans allow you to return to trial work. For example, your policy may give you a two-week trial period. If you return to work for less than two weeks and find that you cannot do your job because of your disability, the policy allows you to continue receiving the benefit as if you had not returned to work. If you can stay at work for more than those two weeks, and then find that the same disability prevents you from doing your work, you must reapply and go through another waiting period, or you may no longer be eligible to receive benefits. a benefit for that disability.
- Transition to Long-Term Disability Insurance: Some STD plans automatically transfer you to an LTD plan if you are still disabled after the benefit period ends.
- Premium Changes: If you subscribe to a “non-cancelable” policy, the insurance company cannot change your premiums or benefits. If you underwrite a “guaranteed renewable” policy, the company can make changes to the premium, but only if they make them for an entire group of policyholders.
- Exceptions: Many policies do not cover disabilities caused by suicide attempts, drug use, war, or attempted crime. Pre-existing conditions are also often excluded (see below). On-the-job injuries, which are covered by Workers’ Compensation for Accidents at Work, are also not covered.
What is SDI?
- SDI stands for State Disability Insurance (SDI), and is a benefit or cash payment that partially supplements your income for up to twelve months when you are unable to do your regular job and habitual due to a mental or physical condition. SDI is a California program administered by the Employment Development Insurance Department (EDD). See our fact sheet, “State Disability Insurance (SDI): Your Legal Rights,” for more information.
What is short-term disability insurance?
- Short-term disability, or STD, insurance generally refers to a private insurance plan that provides you with supplemental income for a defined period (usually six months to one year), when you are unable to work because of a physical or mental injury, illness, or other medical condition covered by the plan. Your employer, or employer, may provide employees with short-term disability insurance to supplement the payments you receive from SDI. In a typical short-term disability insurance plan, a claimant must show that she is unable to do her regular and usual job or similar job. If you’re not sure if your employer provides short-term disability insurance, contact your human resources department.
What is long-term disability insurance?
- Long-term disability insurance, or LTD, generally refers to a private insurance plan that provides partial income supplementation over a long period of time when a person is unable to work because of a physical or mental injury, illness, or other medical condition covered by the plan. Your employer may provide employees with long-term disability coverage. A typical long-term disability (LTD) insurance plan makes payments after SDI and/or short-term disability insurance payments are exhausted. Generally, a claimant requesting LTD payments must show that she is unable to do her own or other work.