Short Term Disability Insurance
At TermLife2Go, we represent different providers offering both individual short term disability insurance and long term disability insurance. You can view our article that covers the top 10 best disability insurance companies for more.
In our complete guide to disability insurance, we provided a lot of information on the different types of coverage available. In this article we will only be highlighting the benefits of individual short term disability insurance.
Short Term Disability Insurance Quotes
We represent some of the highest rated disability insurance companies in the marketplace. If you would like an individual short term disability insurance quote, please give us a call today to speak to a TermLife2Go licensed independent disability insurance agent. Our team of experts can patiently explain to you the pros and cons of each type of policy and riders, and help you decide on what works best for you based on your budget, your needs, your goals and objectives.
What is individual short term disability insurance?
We are talking about individual private disability insurance coverage, rather than group coverage through your employer. Often and individual policy will provide more comprehensive coverage than group, although not always. That is why it is important to understand each policy, including its features and riders.
Short term disability insurance definition:
Short term disability insurance (STD) provides immediate coverage upon a qualifying total or partial disability due to an accident or sickness so you can continue to receive income while you wait for your employer coverage (typically 30-90 days) to kick in. It is also used as supplemental insurance to employer benefits if the amount offered through your employer is not enough. Finally, for short term disability insurance for self-employed and business owners is used as a buffer until the elimination period on long term disability insurance ends.
The elimination period begins on the day you are first treated for a total disability or partial disability and it refers to how many days must pass before your disability income benefits start.
You can choose from a variety of different elimination periods. The shortest elimination period for an accident is zero days and 7 days if due to sickness. You may also want the lowest short term disability insurance premium so you would stretch out your elimination period to 14, 30, 60, 90 days, with some carriers offering up to a 180 day elimination period on STD insurance for both accident and sickness.
If you have employer based disability insurance, you would choose a shorter elimination period. However, perhaps you are supplementing your employer coverage and want your individual policy’s benefits to coincide with your group coverage. Further, you may be self-employed and need your STD insurance policy to provide income benefits until your long term disability coverage starts.
The amount of income paid through short-term disability insurance depends on a factor based on your current income. Typically, how much money do you get from short term disability insurance is around 50-60% of your current income. That might seem like a low number but realize that you receive your benefits income tax free since individual STD insurance policies are paid for with after tax dollars.
Your maximum monthly income benefit may be capped. It will depend on the insurers maximum benefit allowed. Typically, the maximum monthly income benefit for private short term disability insurance will be lower than the maximum benefit offered with private long-term disability insurance.
The duration of the short-term disability income payments, known as the benefit period, generally ranges from 3 months to 12 months. You also have the option of stretching the benefit period out to 18 months or 24 months. The key is to structure your STD insurance so that when the benefit period ends, your long term disability insurance elimination period has passed, and those benefits will begin.
You must be between the ages of 18-61 to qualify for individual short term disability income insurance. Once you have locked into a policy, it is guaranteed renewable to age 65 or 67, with some policies offering conditional coverage that extends past the guaranteed renewable period.
Guaranteed renewable means you have the right to continue your policy until the age cited in the policy as your coverage end date. Your premiums may remain the same, but STD insurance providers reserve the right to raise your rates, but only if the change is made to all policies issued to persons of the same Class. In other words, if premiums are raised by the provider, then the provider must raise the rates on an entire Class of persons, not just you as an individual.
The definition of Class in a disability income insurance policy is referring to all people with the same policy form, Benefit Period, Elimination Period, age, gender, tobacco status, occupational class or optional coverage, living in the same geographic area of the state as each other.
To qualify for total disability benefits, you need to meet the definition of Total Disability in your policy. Total disability is generally defined as a sickness or injury that you have during and after the elimination period, that renders you unable to perform the material and substantial duties of your regular work, you are not performing any other work and you are receiving regular medical care.
You can still receive disability income benefits even if you don’t meet the requirements of totally disabled. You can receive partial disability income benefits for a sickness or injury if you are unable to perform 50% of the material and substantial duties of your regular job for no more than 50% of the time usually spent in the daily performance of those duties and you are receiving regular medical care.
Presumptive Total Disability
You will be presumed to be permanently Totally Disabled if your sickness or injury results in the complete and irrecoverable loss of your speech; hearing in both ears; sight in both eyes; or the use of both hands, both feet or one hand and one foot.
The provider will waive your premiums due and will automatically pay total disability benefits for the full length of the benefit period when it receives evidence of your presumptive total disability. Presumptive total disability benefits are paid even if you return to work at any occupation.
What else is covered under short term disability insurance?
Some of the more common reasons for short-term disability claims are:
- Cancer, heart disease, diabetes, stroke, etc.
- Complications due to pregnancy
- Injuries (work and non-work related)
- Back injuries
- Joint disorders, arthritis
- Digestive issues
What is not covered under short term disability insurance?
Each individual short-term disability income insurance policy includes certain exclusions and limitations. Listed below are a few of the more common exclusions and limitations disability insurance companies will not pay individual STD income benefits for:
- Loss covered by worker’s compensation (unless policy includes Worker’s Comp Exclusion Amendment)
- Mental or nervous disorders
- Substance abuse
- Intentional self-inflicted injury, including suicide or attempted suicide
Terminal Illness Benefit
Like the accelerated death benefit with life insurance, if you are diagnosed terminally ill you can choose to get an accelerated payment of the remaining total disability income benefit due in a lump sum-up to 12 full months of payments at once.
If you die and you still were eligible to receive additional total disability or partial disability benefits, then your survivor beneficiary may be eligible to receive up to three times your remaining benefit due.
Waiver of Premium
After 90 continuous days of total disability or partial disability, the disability insurance company will refund any premiums you made during that 90 day period and waive future payments as long as you are still eligible for benefits. Once your income benefit period ends you will need to start making premium payments again.
Who needs short term disability insurance?
Professionals, either self-employed or business owners, should have disability insurance. Between short term vs long term disability insurance, LTD insurance is the more important insurance coverage to have. However, if you don’t have the emergency funds to get you through the elimination period on your LTD insurance policy, or if you would rather not use your emergency funds while waiting for the elimination period to pass, then STD insurance is a must have.
Do I have to pay taxes on short term disability income?
There are two ways you can receive short term disability income. The first is through your employers group STD insurance plan. The second wat to receive STD income is through an individual disability insurance plan. If you employer pays you STD insurance policy premiums, the benefits would be taxable. If the premiums paid for your policy were with after tax dollars, then the benefits would be income tax free.
What are the requirements to get individual short-term disability income insurance?
There are five primary categories that will determine your eligibility for STD insurance: occupation, age, gender, tobacco use and pre-existing conditions.
Occupation: The primary requirement is that you are working, and your occupation class is covered. Certain hazardous occupations may qualify for substandard ratings. The more hazardous occupations will be declined.
Age: You age is an important factor. The older you are the higher the likelihood you will become disabled. Therefore, the older you are the higher your short-term disability income insurance rates will be.
Gender: Some policies offer unisex rates. However, other policies will consider your gender when deciding your premium payments.
Tobacco Use: if you are a smoker you can expect to pay more for your STD insurance.
Pre-Existing Conditions: You will need to list any pre-existing conditions you have on your application for individual disability insurance. Certain conditions may be excluded under your policy, while others may make you ineligible for coverage.