Short-term disability insurance is private coverage that helps to supplement your income should you be unable to work due to illness or significant injury. This is very valuable protection to maintain. That is because it can ease the financial hardships that all too often emerge when you absolutely must take time off due to a temporary disability.
You are probably thinking to yourself if it sounds an awful lot like workers compensation. However, it actually differs in that your illness or injury need not be work-related in order to claim any benefits. With short-term disability insurance, your benefits typically kick in once the sick leave with your employer comes to an end.
From that point on, the insurance pays out part of your income for a pre-determined time period. Some plans offer as brief as nine weeks to as long as one full year worth of monetary payouts.
How long your insurance benefits last, and the amount of money you will receive over that period of time varies. It is usually predicated upon how much you pay for your monthly premiums. Those payments will also affect the other factors of your plan, such as the wait time in order to receive your benefits.
Enrolling for short-term disability insurance coverage is done in one of two ways. You can either go through the Human Resources department of your employer. You can also sign up with a private insurance company of your choosing.
Be sure to inquire with your company as to whether or not they offer short-term disability insurance. If they do, ask them about the types of insurance plans they provide. Much like other types of insurance, every policy has different components and limitations.
However, if you are seeking an insurance policy on your own, there are some crucial factors to keep in mind when deciding the right amount of coverage for your particular situation.
Benefits
The first thing to determine is how much coverage you really need if you become ill or unable to work in some other way. That means taking an inventory of all your monthly expenses that needs coverage. Then compare those costs to all of your income streams and the other assets that are available.
An Inventory of your expenses should include such things as your mortgage or rent, utility bills, and cell phone. This is in addition to any other outstanding monthly debts that absolutely cannot go unpaid for any length of time.
You then need to consider whether or not your plan covers you in the event that you are injured or in an accident. Also, determine whether your insurance coverage is more comprehensive to include illnesses.
Finally, you will need to assess how long you are willing to wait before your coverage starts making payments. That means thinking about how much money you have available to cover all your monthly bills if an emergency arises.
Coverage Lengths
Your policy is covered for as long as you want. Therefore, you need to think about whether you want your benefits are paid out over a shorter time period, just a few weeks or one that covers you for a full year.
Should you decide that you require coverage that runs for longer, then seek out long-term disability insurance instead. That type of insurance differs in certain ways beyond merely the extended benefits period.
Policy Factors
Your employer or professional organization may not offer short-term disability insurance. If you are seeking out an individual plan through an insurance company, there are the three main factors you need to consider.
Monthly premiums are required, as with any other type of insurance. There are some standard rules that apply to every policy. Basically, the more you pay each month will dictate how your plan works.
- Waiting Period: This is the length of time that it will take to start getting benefits once you suffer an injury or illness. You can adjust this waiting period through your monthly premium. The more you pay a month, the shorter amount of time to wait.
Less expensive plans are great on the wallet but if you do need to file a claim you will wait up to a week or even month for your benefits to kick in. Some plans have no waiting period. Others might differ between illness and injury when making you wait for the first check to arrive. Long-term plans could take a month or six months.
- Length of Benefits: This is the length of time in which you will receive your payments should you file a claim due to illness or injury. Again, the amount of your premium affects how long your benefits period lasts.
This is because the more you pay, the longer the extension. However, short-term disability policies come with a maximum period of 12 months. These plans are less than that. However, with anything longer, you want to opt for long-term disability insurance instead
- Payouts: As discussed, you will need to tally up all of your monthly expenses before you start to shop around for your individual policy. Think of all the things you spend money on each month. Be sure to remain aware of the possibility that you are responsible for additional healthcare costs as a result of your injury or illness.
Now that you have your monthly number, get a plan to have enough cash for all of those monetary obligations. Many policyholders opt for an amount equal to 60% of income before their disability.
Employer-Sponsored Plans
Obtaining short-term disability coverage through your employer might require you to work for that company a certain length of time before being eligible to receive benefits.
These waiting periods are more common on group plans through unions and other trade organizations. The extension of time you might be expected to wait will vary.
However, if you plan to apply for such a policy through your employer or organization be sure to ask if there is a waiting period before you qualify to get that coverage.
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