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What Is A Short-Term Disability Insurance And How It Works?

Updated : August 4th, 2020

It is estimated that about 5% of American workers experience a short term disability due to various reasons, including pregnancy, illness, or injury. A disability may lead to a loss in income, thereby financial crisis. Fortunately, a Short-Term Disability insurance program can replace your lost income and provide you financial support while you take a break from your work to recover from illness or injury.  

What Is A Short-Term Disability Insurance?

Short-Term Disability (STD) insurance provides income replacement or compensation if you are unable to work for a limited period due to illness, injury, and childbirth. Generally, the insurance program pays 40% to 60% of your weekly gross income. 

Who Qualifies For A Short-Term Disability Insurance?

To be eligible for the Short-Term Disability insurance, you must meet several requirements. They include: 

  • You must have worked a minimum length of time before being eligible for the insurance program, i.e. 1 month or 6 months, depending on your state rules
  • The injury or illness must be non-work related
  • You must earn minimum wages if your state requires
  • Pregnant women can collect Short-Term Disability benefits for several weeks for delivery and recuperate 
  • You have to submit medical records to prove your disability
  • There is 7-days waiting period before benefits are payable. You cannot collect benefits until the 8th day of your temporary disability 
  • Benefits will not last more than 26-30 weeks ( 52 weeks in California)

States Providing A STD Insurance 

Only a few states provide Short-Term Insurance benefits. They include California, Hawaii, New Jersey, New York, and Rhode Island. A few states offer temporary disability aid to low-income families through other programs. 

For example, Maryland’s Temporary Disability Assistance Program (TDAP) offers monetary and housing and medical assistance. 

California, New Jersey, New York, and Rhode Island states have paid family leave programs, and states like D.C. are set to authorize a paid family leave program starting from July 2020.

How Does A Short-Term Disability Insurance Work?

If you are not able to work due to illness or injury for a limited time and have a Short-Term Disability policy, you can file a claim. While filing a claim, submit medical records or other information that proves you are unable to work. Once approved, the payment will be sent to you directly. Note that you use the money to pay any bills, and there are no restrictions or limitations on how the benefits must be used.

Who Pays For A Short-Term Disability Coverage?

The state or employer provides a Short-Term Disability insurance policy. Generally, employers who offer policy have a choice of having their employees pay for coverage, with tax implications. 

A Short-Term Disability policy provided by an employer pays a percentage of an employee’s wages for a limited amount of time. STD insurance policy given by employers may offer a wide range of full or partial income coverage, depending on the premium and policy level.

Each state has its own set of requirements as to whether companies must provide STD insurance. States can also decide the weekly cash benefit limits.

How To File For Short-Term Disability Insurance Program?

You can apply for Short-Term Disability either by filling a form given by your employer or 

By visiting your state’s Department of Labor and Workforce Development and filing the application form. The form will have 2 or 3 sections. After entering the necessary details in the employee section, give the form to your employer and doctor to complete the pending sections. 

Is Short-Term Disability Insurance Taxable?  

STD insurance may or may not be taxed. If you are paid with pre-tax dollars, the benefits will be considered a part of your income, and you would be liable to pay taxes. But if you are paid with after-tax dollars, you need not pay taxes on the benefits. 

Final Words  

Short-Term Disability insurance can provide you financial security when you are unable to earn income to support you and to your family. If you are injured or pregnant, and qualify for the insurance program, then hurry up and submit an STD insurance application. 

 

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