Wednesday, September 29, 2010

Consumer Boomer

Consumer Boomer

Short Term Disability Insurance – What You Need to Know

Posted: 29 Sep 2010 05:00 AM PDT

The purpose of insurance is to provide people with a safety net in case of an emergency. Many companies purchase an insurance plan and pay the insurance premium for their employees while others provide none. Some employers pay for up to a certain level of coverage for their employees and have the employees 'top up' for maximum coverage.

Short Term Disability Insurance Policies
Creative Commons License photo credit: Unlisted Sightings

What is Short Term Disability Insurance?

Should you become sick, or injured and unable to work, short term disability will kick in to provide income of usually between 40 to 60 percent of the person's regular base salary. Some common short term disability claims are made as a result of injuries, arthritis, diabetes or illnesses such as cancer, heart attack that would prevent an employee from performing their job.

When purchasing short term disability, check to see when the coverage begins. Some companies begin as soon as one day after an injury and some require a 14-day waiting period after a person becomes sick or disabled and can not work. Most companies do require that mandatory sick days be used prior to collection of any disability benefits. If you become sick or injured, it may be necessary to corroborate the illness or disability with a medical doctor.

Who is Eligible for Short Term Disability?

Usually a company's short term disability program covers most employees but there are some common restrictions:

  • Eligibility may be dependent on how long the employee has been working at the company. For example, some companies may require that short term disability is available to employees that work at least 30 hours per week, or not available to part time or casual employees.
  • There may be restrictions that identify only those employees that have been working at the company for so long are eligible for short term disability coverage.

Short term disability is usually considered with illnesses or disabilities that are expected to last less than 6 months. If an illness, permanent disability or condition is persistent or lasts longer, long term disability insurance should be considered.

Things to consider when purchasing a disability insurance package include:

  • Price of Premiums – Take the time to read the premium information to check that the benefits that are provided are adequate to your needs.
  • Income Requirements – The amount of compensation can vary between 40-60% of your gross income.
  • Payment Schedule – If you currently are relying on a weekly pay check but the disability payments are offered on monthly payments there may be some other financial considerations to balance in order to avoid becoming overdrawn at the bank.
  • Length of Coverage – The shorter coverage period will mean smaller premiums. This has to be balanced with the expected income that is required and the estimated amount of income required.
  • Time Period – The number of days before the coverage kicks in
  • Other available options

Imagine the stress and turmoil that would be raised if an accident or injury resulted in your not being able to work for a few months. Short term disability insurance can help cover living expenses including food and rent during the time you are not collecting a regular pay check. Think of short term disability insurance as providing you not only coverage but peace of mind.
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