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Short-term disabilities are more common than you might think, with 5.6% of working Americans experiencing one every year, according to the Council for Disability Awareness. That’s where short-term disability insurance comes in. It replaces a portion of your paycheck if you can’t work due to an illness or injury — but the benefits typically only pay out for up to a year.
What's in this guide?
- What is short-term disability insurance?
- How does short-term disability insurance work?
- Compare disability insurance
- What qualifies for short-term disability insurance?
- How to apply for short-term disability insurance
- Is short-term disability taxable?
- Short-term vs. long-term disability
- Is short-term disability worth it?
- Bottom line
- Frequently asked questions
What is short-term disability insurance?
Short-term disability (STD) insurance pays a percentage of your income if you suffer a covered illness or injury and can no longer work. It replaces between 60% and 80% of your paycheck and pays benefits for a short period, typically three to six months.
How does short-term disability insurance work?
When you apply for short-term disability insurance, you’ll need to choose an elimination period. Also known as a waiting period, this is the length of time you’ll wait before you start receiving benefits. The options vary between insurers, but usually range from one to 90 days.
If you become disabled, the clock starts ticking on your elimination period. Once the elimination period ends, the benefit period begins and you’re eligible to collect benefits. Since STD is designed to cover short-term needs, the benefit periods are usually limited to 30, 60, 90, 180 or 365 days. A handful of companies offer benefit periods between one and three years — but that’s rare for short-term disability insurance.
Once the benefit period is over, you’ll stop receiving disability payments.
Compare disability insurance
Since you’ve got a wide variety of options, use the table below to review some of your choices. Check the compare box below the providers then click compare to see the details listed side by side.
What qualifies for short-term disability insurance?
Each insurer has its own definition of disability. But generally, short-term disability insurance can cover:
- A disabling injury — like a broken leg or hand
- A prolonged sickness — such as glandular fever
- A musculoskeletal disorder — including arthritis, back pain or spine and joint disorders
- A chronic digestive disorder — like gastritis
- A mental health condition — such as anxiety or depression
- Pregnancy and maternity leave
What if I get injured on the job?
Work-related injuries and illnesses are typically covered by worker’s compensation. However, if you also have a short term disability policy that covers work-related injuries you might be able to collect both until your policy begins to offset with other income.
Some insurers — such as Mutual of Omaha — offer a worker’s compensation benefit rider. This pays out 50% of your STD benefits if your injury or illness is covered by state or federal worker’s compensation.
Did you know? Pregnancy is the most common reason for filing a short-term claim
A quarter of short-term disability claims are related to pregnancy and childbirth, according to the Council for Disability Awareness.
Depending on your policy and how you deliver your child, you might be eligible to receive benefits for six to eight weeks. If you have a high-risk pregnancy or experience complications, hypertension or postpartum depression after birth, the benefits might be payable for longer.
The catch? To qualify for short-term disability benefits, you must purchase the policy before becoming pregnant.
How to apply for short-term disability insurance
In California, Hawaii, New Jersey, New York and Rhode Island, employers are legally required to offer short-term disability plans to their employees. But if you live outside of those states and you don’t have STD through your workplace, you can purchase an individual policy.
Most insurance companies sell short-term disability insurance. One of the perks of going through a private provider is that you’ll be able to customize your elimination and benefit periods to suit your needs and financial situation.
Is short-term disability taxable?
You won’t pay income tax on the proceeds from a disability policy if you paid the premiums with after-tax dollars.
Are the premiums tax-deductible?
Unfortunately, no. Your short-term disability premiums don’t qualify for a tax deduction.
Short-term vs. long-term disability
Both policies protect your income, but the major differences are the percentage of your paycheck they replace, and the time that benefits are payable.
These are the key features of short- and long-term disability insurance.
Is short-term disability worth it?
If you rely on your income to survive, it’s a good idea to look into disability insurance. That way, if you become disabled and can no longer work, your policy will step in to cover part of your income and help you pay for your living expenses.
While short-term disability can replace up to 80% of your salary, the benefit period is limited. As such, short-term disability policies are best used to complement long-term plans.
Long-term disability insurance lasts many years or until you reach retirement, and the list of covered illnesses and injuries is more exhaustive. Though it’s the more expensive option of the two, you can cut costs by choosing a longer elimination period.
Short-term disability insurance protects your paycheck during the initial weeks or months of your disability. It covers a broad range of injuries and illnesses, from pregnancy and childbirth to back pain and broken bones. But the coverage is limited and more often than not caps out at a year.
Explore your policy options with our comprehensive guide to disability insurance.
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