There’s a few different ways to look at an insurance policy and short-term disability is no different. When looking to see if a type of insurance is right for you, it’s important to note if you have the asset that the insurance is meant to protect. If you’re an automobile owner, it makes sense to shop for insurance to protect it, which means most people have auto insurance.
But when you start looking at things like boat or motorcycle insurance– insurance for assets that many people do not own– it doesn’t make sense unless you own that asset.
Short-term disability insurance is no different. It’s protecting an asset for the insured. And it can be viewed in a few different ways. It’s an insurance that is protecting an intangible asset, and acts like life insurance. However, life insurance protects your assets in the event of death and ensures your family can continue with their lifestyle for a period of time following your death.
Short-term disability is meant to protect your ability to make an income and, more importantly, protect your income. Its purpose is to insure your paycheck. If you are unable to work for a short amount of time (hence the “short” in the name of the insurance) then a paycheck from the insurance company is still coming in, ensuring that you and your family are able to continue for a short period of time until you either recover or find another means of an income.
Whereas life insurance is giving money to other people (beneficiaries) when the insured passes, short-term disability pays money directly to you, the insured, in the event of an injury or illness, making it an important part of a financial plan.
So who has the asset that short-term disability protects? Anyone that is both receiving an income from working and could not continue without it. Now that second part can be very subjective, meaning, as always, you should consult with an insurance professional to ensure that the insurance meets your needs.
Disclaimer: This information does not constitute financial advice. For specific information for short-term disability policy plans and features, consult your local insurance agent.