Short-Term Disability (STD) Insurance helps replace some of your income for a period of a year or less when you cannot work at all or can only work part-time because of a disability.

To be covered by STD, you or your employer must pay a monthly premium. When an illness or injury prevents you from working, you apply for benefits by speaking with your Human Resources representative (if you have a group policy) or your insurance agent (if you have an individual policy).

Most STD policies require medical documentation that shows why you are unable to perform the functions of your current job and that explains what your functional limitations are. Depending on your policy and your medical condition, you may need to report on the status of your disability. There will probably be a waiting period between the date you leave work and the date when you actually begin to get benefits.

Once the waiting period is over, you will generally get a set percentage of the wages you were earning before you were disabled. Although the amount varies, payments are generally around 60% of your previous wage. For example, if you were paid $2,000 per month at work and your policy pays 60% of your pre-disability earnings, your benefits amount will be $1,200 per month. STD policies generally lasts between nine weeks and 52 weeks (or one year), after which time your benefits will end.

When your STD benefits ends, you may have the option of moving to a Long-Term Disability (LTD) policy if you are covered by one. Some STD plans automatically transition to a LTD plan if you are still disabled after the benefits period ends (the benefits period is the amount of time that you will get a benefits check). Another option may be to go on Social Security Disability Insurance (SSDI). If you anticipate needing SSDI, you should apply as soon as possible.

Note: The standards for being disabled under a STD policy and a LTD policy are not always the same. Most STD policies require the person to be disabled from working at their own job. Many LTD policies require that the person be unable to work at any job for which they are reasonably qualified based on their training, education, and experience or any job that the person is qualified for that pays at least a specified percentage of what they earned at their pre-disability job.

Where to Sign Up

You can sign up or apply for Short-Term Disability (STD) Insurance by contacting:

• Your employer’s Human Resources department if your employer offers disability income insurance
• A trade union, alumni organization, or other professional organization you are a member of if they offer group plans
• An insurance agent if you want an individual plan

Group Coverage and Individual Coverage

One way to get STD insurance is through an employer, union, or other professional organization. This type of policy is known as group coverage and is your best option. To get coverage through your employer, you usually need to be working a minimum number of hours per week. This is called the “active work requirement.”

Another option is to purchase individual coverage directly from an insurance company or agent. The main reason for getting an individual policy is if you work for an employer who does not offer any STD policy or the income from the insurance would be insufficient if you did become disabled.

Getting an individual policy is a little more complicated than getting a group policy. You will have to look at different factors before you choose a policy and undergo medical underwriting. You may be denied coverage. These and other issues related to finding and choosing an individual policy are discussed below.

Major Differences in Policies

If you purchase an individual policy, you will pay a monthly premium for your STD insurance. The premium depends on many factors, including your age, your health, the type of work you did when you first signed up for STD, and the length of the waiting period.

If you have a group STD policy, ask your Human Resources department about your plan’s waiting period, coverage amount, and benefits period:

• Waiting Period: Sometimes called the elimination period. This is the period between the start of your disability and when you are paid your benefits. Generally, policies with longer waiting periods are cheaper. Many plans have different waiting periods for different types of disabilities. For example, a plan may have a seven-day waiting period for illnesses and no waiting period for accidents.
• Benefits Rates: Most policies pay about 60% of the income you made prior to becoming disabled. Some policies also change rates during the benefits period. For example, your policy may pay 80% for the first three weeks of disability and then 50% for the remainder of your benefits period. If you get an individual policy, think about how much money you believe you would need to pay for your essential monthly expenses, such as your mortgage payments or rent, food, utilities, and transportation, if you couldn’t work. Remember that if you develop a disability, you may also have additional medical costs. Try to get a plan that you think will cover your expenses.
• Benefits Period: The benefits period is the amount of time that you would get benefits if you became disabled. For STD policies, the benefits period is 12 months or less. If you have an employer-sponsored policy, but you don’t feel it gives you a benefits period that is long enough, you can buy additional coverage. You may want to select a policy to get the longest benefits period that is available. However, the longer the benefits period, the more you will pay in premiums.

If you are applying for an individual plan, make sure you understand the policies different insurers offer.

Medical History and Pre-Existing Conditions

When you sign up for STD insurance, the insurance provider will look at your medical history. Insurers look at your medical history differently, depending on whether you are signing up for group coverage or applying for individual coverage.

Group Coverage

For employer-sponsored coverage, you will be allowed to sign up for the plan during an initial enrollment period. During this period, the insurance company cannot deny you coverage based upon a pre-existing condition, so it is very important to sign up then.

If you have a pre-existing condition when you sign up for your group plan, you may be required to work for a certain period of time before that pre-existing condition is covered by your insurance policy. This period of time is generally between six months and 12 months and is called an exclusionary period.

If you do not sign up during the initial enrollment period, you may have to undergo medical underwriting. The insurance company may review your medical records to find out if you have a pre-existing condition or are getting treatments for a potentially disabling condition. Treatments can include advice from a doctor or a medication. If the insurance company finds that you do have a health condition or have been treated, the insurance company can deny you coverage, exclude conditions from being covered, or have an exclusionary period for your pre-existing conditions.

Similar rules apply to other types of group coverage that are not employment-based (like group policies through a trade union or professional organization). There may be specific periods of enrollment, insurance companies may be able to deny coverage based on health conditions, and there may be exclusionary periods for pre-existing conditions.

Individual Coverage

If you want individual coverage because you do not have access to group coverage or because your group coverage offers small cash benefits or doesn’t give you benefits for long enough if you do become disabled, you will also have to undergo medical underwriting.

The insurance company will review your application and may request and review your medical records to find out if you have a pre-existing condition or are getting treatments (which can include advice from a doctor or a medication) for a potentially disabling condition. If the insurance company decides you do have a health condition or have been treated for one, the insurance company can deny you coverage, exclude conditions from being covered, or have an exclusionary period for your pre-existing conditions.

When to Sign Up

The sooner you sign up for disability income insurance, the better. With employer-sponsored plans, you should sign up during your pre-enrollment period, also called the initial enrollment period. With other group policies, you may have to be a member of the group for a period of time before you can enroll in the plan. Once you become eligible to enroll, sign up as quickly as you can to avoid exclusionary periods or the exclusion of specific conditions.

If you are interested in purchasing an individual policy, you should apply as young as possible. Young people pay lower premiums and if you purchase disability income insurance at a young age, you may be able to get a noncancelable policy, which means that your coverage can’t be canceled. You also may be able to get a policy where your premiums can’t be raised as long as you pay your premiums on time.

Getting Benefits

If you get injured or become ill, contact your Human Resources department (if you have group insurance) or insurance agent (if you have an indivdiual policy) as soon as possible to begin the application process. You are eligible to get disability benefits if you cannot work for any health-related reason. Your injury or illness does not have to be work-related.

Once you apply for cash benefits from your disability income insurance plan, there is usually a waiting period before you can begin to get benefits. For Short-Term Disability (STD) Insurance, the waiting period is typically a few days, but it can be as long as a month or more. Some policies also require you to take your sick days before you are allowed to collect your benefits.

Once the waiting period is complete, you should get your benefits about a month later.

The Benefits

Each policy has a different way of figuring out how much money you will get. Some send you a set dollar amount, while others give you a percentage of the wages you made before becoming disabled. Depending on your plan, bonuses, tips, and commissions from your job may or may not be included in the calculation of your wages.

Depending on how your disability income insurance is paid for, your benefits may or may not be taxed when you get them. If your employer paid your premium, you usually will have to pay taxes on your benefits. If you paid for an individual policy with your own taxed income, you probably won’t have to pay taxes on the benefits. Contact your income tax professional or Human Resources department for more information.

Public Disability Benefits

While you are getting private disability benefits, you may want to apply for public benefits like Social Security Disability Insurance (SSDI). For example, if you are getting STD and are not going to be able to return to work when your STD ends, you should apply for SSDI as soon as possible.

If you get benefits from other programs, like SSDI or Supplemental Security Income (SSI), at the same time as you get STD, most private disability income insurance policies will lower your benefits by the amount those benefits programs pay you. For example, if your STD benefits are $2,000 per month and you begin to get $800 per month in SSDI benefits, your STD benefits will be lowered to $1,200 a month.

The advantage of being enrolled in SSDI or SSI while getting disability income insurance is that they can make you eligible for Medicare or the Arizona Health Care Cost Containment System (AHCCCS), health coverage which isn’t supplied by disability income insurance.

Health Coverage

STD insurance gives you money, not health coverage. For the first 12 weeks that you are unable to work due to a medical condition, you may still be entitled to be covered by your employer's benefits (including your employer's health plan) under the Family and Medical Leave Act (FMLA).

To be entitled to continuing coverage, you must still be employed at your organization. The FMLA allows you to get up to 12 weeks of leave for a medical condition or for care for a family member with a medical condition if you have been employed at the organization for at least 12 consecutive months prior to taking the leave. During the leave, your employer must continue to offer you the health benefits they offered prior to the leave.

Even though this leave will be unpaid, during your FMLA leave you can still get paid if you use sick time, vacation time, or you get STD benefits. To read more about the FMLA, click here.

After the 12 weeks of leave are over, your employer has the right to let you go if you are still unable to return to work. If you want to continue to get your health coverage through your employer’s health plan after you are laid off, you may be able to continue that coverage by paying out of pocket for COBRA.

Another option for private health coverage is to find an individual plan on HealthCare.gov. Depending on your situation, the government may help pay for your premium for an individual plan through tax subsidies. Or, you may become eligible for public health coverage like AHCCCS or Medicare. To learn more about different health coverage possibilities, see DB101's Health Care Coverage section.

In addition to different waiting periods, benefits periods, and benefits rates, which are described earlier in this article, Short-Term Disability (STD) Insurance policies can vary in other ways. These details are important because they can have a major impact on your benefits if you become disabled.

Definition of Disability

Disability income insurance providers think about disability in two ways:

1. Own-Occupation Disability (or “Own Occ” ) means your disability prevents you from performing your own occupation, which means you cannot do the work or job you have been trained to do and have experience in
2. Any-Occupation Disability (or “Any Occ”) means your disability prevents you from performing any occupation:
   • Sometimes Any Occ means that your disability prevents you from performing any occupation that pays at least a specified percentage of what you earned before your disability

Own-occupation insurance policies pay you if you are unable to perform your own occupation, even if you are able to get a different type of job. They have higher premiums than policies that require you to be unable to perform any occupation.

Trial Work Period

Policies may allow you to return to work on a trial basis. For example, your policy may give you a two-week trial period. If you go back to work for less than two weeks and then find that you can’t do your job because of your disability, the policy would allow you to continue your benefits as if you hadn’t returned to work. If you are able to return to work and then you find that the same disability again prevents you from doing your job, your policy may or may not require another waiting period.

Part-Time Work

Some plans allow you to return to work part-time while continuing to pay your benefits. This is usually referred to as a “residual” or “loss of earnings” benefit. When an employee returns to work part-time, wages for hours worked are paid by the employer and STD replaces the regular hours not worked at the pay replacement level.

For example, if you worked eight hours per day before your disability, and you are able to return to work four hours a day, the disability income insurance policy may replace some of your income for the remaining four hours.

Changes to Your Premium

Under noncancelable policies, your policy cannot be canceled as long as the required premiums are paid on time.

Under guaranteed renewable policies, your premium can be raised, but only if the change affects an entire class of policyholders. Initial premiums for guaranteed renewable policies can be less expensive than noncancelable policies.

Some policies may also have provisions that mean the premium can never be raised above a certain amount specified in the policy. Other less expensive policies that don’t have premium or renewability guarantees are also sometimes available.

Exclusions

Many policies will not cover disabilities caused by suicide attempts, drug abuse, war, or attempts to commit a crime. Pre-existing conditions are also frequently excluded, as was discussed earlier in this article. On-the-job injuries, which are covered by Workers’ Compensation insurance, are also not covered.

Ana’s Story

Ana had just started a new job. She decided to ask her Human Resources (HR) representative about the benefits she was eligible for and how to sign up for them. The HR person, James, told Ana that the employer offered Short-Term Disability (STD) group coverage and that the initial enrollment period lasted for one month.

Ana had injured her back the year before and thought maybe she wouldn’t qualify for the STD coverage. However, James told her that through the group plan, she could sign up for disability income insurance without medical underwriting, as long as she signed up during the initial enrollment period. He told her that she would still have to disclose her condition, and she would have a six-month exclusionary period, but that they would not deny her coverage.

Ana signed up for the STD plan the next day. The group policy supplied by her employer had a one-year minimum service requirement, which meant that she would not become eligible for a benefit until she had worked at the company for a full year. For back injuries, there would be an additional six-month exclusionary period, which meant she would have to wait an additional six months to be covered, because her back problems were a pre-existing condition.

Two years later, Ana re-injured her back. She went to the doctor, who told her that she would not be able to work for at least three months. Ana immediately notified James, the HR representative, who gave her some forms that her doctor needed to fill out. Ana faxed the signed forms to James. There was a seven-day waiting period on her policy, which meant that she would start getting her benefits a week after she had left work.

After the waiting period, Ana began to get weekly disability benefits. She had earned $400 a week before her injury, and her policy paid 70% of pre-disability earnings, so she would get a $280 check every week until she returned to work or her policy ended. Three months later, Ana and her doctor decided that she could go back to work. She notified her company and went back to work the following week. Her STD benefits stopped.

Ana went to work for just four days before she realized that she was in too much pain to do her job. She worried that she wouldn't be able to go back on her STD benefits, so she spoke again with her Human Resources department. James told her that the group disability plan at her job allowed a two-week trial period, which meant that as long as she hadn't been back at work for two full weeks, she could go back on STD benefits. Ana decided to go back on the disability benefit until she was really better.

Two months later, Ana felt completely healed, but her doctor recommended that she take it easy so that her back didn’t get worse again. She remembered that her policy allowed her to return to work part-time and would pay 70% of her income for the hours that she couldn't work. She decided to work for four hours a day.

Before her injury, Ana had worked eight hours a day, five days a week, for $10 an hour. That came to $400 a week. By returning to work part-time, she would make $200 in wages, and the insurance would pay $140 (70% of $200) for the hours she was missing. After a month, Ana and her doctor agreed that she could return to work full-time. She let her HR department know, stopped getting her STD benefits, and returned to work full-time.