Short term disability insurance

Do you have a high enough level of savings in place if you were unable to work for a number of months due to a disability or illness? This is exactly what a short term disability insurance policy is for. Recent statistics produced by the Council of Disability Awareness informs us that up to 30% of the people entering today’s workforce will incur a disability prior to their retirement. It is also estimated that approximately 15% of workers can expect to suffer from a disability for up to 5 years before they retire. I’m sure you’ll agree that these are a fairly shocking set of figures and prove even more how vital short term disability insurance can be.

This type of insurance policy is intended to replace a percentage of your lost earnings should you become temporarily disabled. This does exclude on the job injuries, which are usually covered by workers compensation insurance. However, if you are unable to work for a short period of time due to an injury or illness, you can expect this kind of insurance policy to provide ample coverage. According to the Life and Health Insurance Foundation for Education, you should expect a Short Term Disability Insurance policy (STD) to provide at least 50%-65% of your basic gross income. Unfortunately, this will not include any overtime, bonuses or commissions you are used to receiving on a monthly basis.

On average these benefits are expected to last anywhere between three to six months, although most policies have will pay benefits for up to 2 years. The maximum amount of benefit you can expect to receive each month is capped to a certain percentage of your salary, or as high net-worth earner a maximum set amount will be paid each month. The average cost of a STD policy in the United States for 2009 was in the region of $210 per annum. This form of insurance is known as a “guaranteed issue” which means you will not have to take a medical examination to purchase coverage.

There is typically a waiting period before you can start receiving benefits, however, this will very much depend on the extent, and type, of disability or illness you are suffering from. An example would be that most types of injury will allow you to make a claim from day one – Falling off a ladder, a serious car accident, etc. However, an illness may not be covered until a maximum period of 14 days after the illness was first diagnosed or contracted. An example may be that you have a cold and take a few days off work. A few days later your cold evolves into full-blown pneumonia and you find yourself hospitalized for a number of weeks. Your employer may actually impose some restrictions on you, and the policy, if you are off work with an illness. You may be expected to use up your paid sick days first prior to any benefit being paid.

Short term disability insurance is something that you may have never considered before or is something that you believe you will never need. However, the likelihood of a disability is far greater than death for most people, but the majority of us have some form of life insurance in place. Although a disability or serious illness is not something you want to think about, you will have to consider how you and your family would cope financially in these circumstances. Even if you receive certain employer benefits and social security for a diagnosed serious illness or disability, you will also receive STD.

This form of insurance is especially important for those of you on a tight budget or struggling to make ends meet. Can you even begin to imagine the catastrophic effect a disability and a lack of income could have on your life? Often the best way to find out about short term disability insurance is through your employer. You can purchase an individual policy via a private insurance company however these are often only available on a limited basis. Many insurers would rather provide an accident policy, which will pay a fixed benefit on a monthly basis for up to a year should you suffer an injury or serious accident.

Last updated on Apr 5th, 2011 and filed under Health Insurance. Both comments and pings are currently closed.

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