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short term disability

Short Term Disability: Policy Provisions

Every insurance policy is going to dictate different terms and conditions. Luckily, the potential insured has at least a small choice on which policies work for them and can pick and choose a lot of provisions in an insurance policy.

Sometimes, however, the potential insured has to either go along with what the insurance policy states or simply go without insurance.

And in the case of short-term disability insurance, there are static provisions and terms in the policy just like this.

So What Provisions Should I Look Out For?

Because short-term disability insurance is primarily concerned with covering workplace injuries, a lot of policies are concerned with making sure that the employee is a fully-fledged member of the staff.

This means making sure that the employee is working enough hours to be considered full time (usually at least 30 hours a week).

Another policy provision to look out for is one stating that the employee must have been working for the employer for a set of amount of time before a claim can be filed and coverage takes effect.

What About Other Provisions?

Most of the provisions in a short-term disability policy are, luckily, customizable to the potential insured. These include the most important aspects, such as benefit period, benefit amount, and waiting period.

Other things to look for are what the policy defines as a disability. Somethings the policy must define as a disability by law, and others the insurance companies may have more leeway with.

The provisions listed above are not meant to be exhaustive or representative of all potential policy provisions and terms. They were only meant to make you aware of the static terms that the potential insured is incapable of changing and must take extra care to review them.


Disclaimer: This information does not constitute financial advice. For specific information concerning your financial situation, please consult your local financial advisor.

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short term disability

Short Term Disability: What Is an Individual Basis?

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Having an insurance plan be sold on an individual basis can mean a few different things. But most importantly it means that the plan is customizable to the person buying the policy. Buying a short-term disability policy on an individual basis is no different.

There may be certain riders, provisions, or policy features that you do or do not want that your coworkers would disagree with you about whether those options would also be best for them. To resolve this, while the insurance might be bought through the workplace, the individual policies are geared toward the individuals buying them.

Why Is This Beneficial (or not Beneficial)?

Having your independent insurance agent run a check against what the policy prices and features are like in an individual policy versus what they are in a group plan is an easy way to see what would work best for either you or your employees, depending on who’s planning on buying the insurance.

Of course, as with most products you buy, it’s not just about price. The features attached to the insurance plan bought on an individual basis are more easily customized, meaning you can pick and choose what you get. You may want insurance policies that have low deductibles or low premiums or a multitude of different options.

Consequently, because you’re picking features you do want and removing those you don’t want, it means you’re only paying for those that you do want. This can mean substantial savings compared to policies sold not on individual bases.

When Might It Be Beneficial to Have Group Insurance?

There are two main circumstances where group insurance may make more sense to purchase than individual policies. The first is when preexisting conditions may be a concern, and that is because historically individual policies required individual underwriting by the insurance companies in most states.

Because group insurance is spreading out the risk over more people, some companies may forgo individual underwriting, making it easier to become insured despite a preexisting condition that may otherwise have been a concern.

The other instance where group insurance may be more beneficial to the insured is when greater coverage is needed. Group health insurance traditionally covered more than individual policies.

 


Disclaimer: This information does not constitute financial advice. For specific information for short-term disability policy plans and features, consult your local insurance agent.

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Short Term Disability: What is Fully Insured?

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What Does it Mean to Be Fully-Insured?

When a company gets big enough, it may realize that it needs to add benefits to either comply with legal regulations or just to increase employee retention or productivity for its own benefit. One of the benefits the business owner may decide to offer might be short-term disability insurance as opposed to the required workers’ compensation, which is why this concept is important. And there’s a few ways for the business owner to get short-term disability insurance.

One of the ways for a business to insure its employees is to be considered fully-insured, meaning that the business is paying premiums (whether being funded by the company or its employees) to an insurance company to insure its employees. The term fully-insured can be used to mean fully-insured by an insurance company, which is the main takeaway here. This type of coverage is considered the traditional way of covering employees.

When a company sets up the plan through an insurance company, the premiums are fixed for a year, meaning they could change from year to year as new insurance contracts are put out. The premium amount is based on the number of employees enrolled in the plan, making it more beneficial for the insurance company and employer to enroll more employees.

The benefit to the employer (or employees if paid by them) is generally reduced premiums and the benefit to the insurance company is a greater pool of people that the risk is spread across.

In a fully-insured plan, traditional insurance concepts and policies prevail because it is an insurance company handling the administration of the insurance. Therefore, for short-term disability, a claim is filed when an employee becomes sick or injured and waiting periods and benefit periods apply, unlike what might be expected in some self-insured plans.

 


Disclaimer: This information does not constitute financial advice. For specific information for short-term disability policy plans and features, consult your local insurance agent.

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Short Term Disability: What Is a Partial Disability?

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When looking through a short-term disability policy, it is important to note key differences in meanings between certain aspects. One of those aspects to consider is the difference between partial disability and total disability. We’ll look at what is meant by partial disability here, and save total disability for another post.

What is a Partial Disability?

A partial disability is the inability of the insured to perform at the maximum of their ability pre-disability. Partial disabilities can be caused by either injury or sickness and a partial disability is generally assessed when a person can complete some of the duties of their occupation but they are not able to complete all of the duties.

How Much Does a Partial Disability Benefit Pay?

Because the insured is still able to work, the benefit amount is usually less– sometimes considerably– than the benefit would be for a total disability. The ability to work helps offset the loss of income from the insured potentially either working less hours or having a different, possibly lower paying, occupation if they cannot perform enough of the duties of their prior occupation.

How Long Does the Partial Disability Benefit Pay?

Because the insured is still generally able to work a job during a partial disability, the benefit period is usually less than the total disability benefit period would be, perhaps lasting for around 3 months.

Rider or Policy Provision?

While total disability benefits may be a given for a short-term disability policy, partial disability benefits may either be part of the policy provisions or they may be offered as a rider. Be careful to look through the policy and ask your insurance agent questions on the difference and what the price difference would be to add a partial disability rider if it is not offered as a policy provision.

 


Disclaimer: This information does not constitute financial advice. For specific information for short-term disability policy plans and features, consult your local insurance agent.

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short term disability

Short Term Disability: What Does It Cover?

When reviewing options for which assets a person should insure, it’s important to note which assets are most important to you. Most working people will agree that their most important asset is their ability to make money; i.e. their body or their mind. If the income stops, most of the other assets will disappear over time as well. Therefore, it’s important to look for insurance policies that will prevent this from happening in the event of an injury or sickness.

We’ll be reviewing what might cause this loss of income and how short-term disability insurance can protect you from losing your assets in the event of a temporary injury or sickness.

What Are the Top Reasons for a Short-Term Disability Insurance Claim?

One of the top reasons for a person filing a disability claim is a pregnancy, at roughly 19% of all short-term disability claims. What might be surprising for some people is that a normal, planned pregnancy is usually covered by a short-term disability policy.

Other claims can stem from back problems, digestive problems, and serious illnesses such as cancer. These injuries and illnesses are among the top reasons for short-term disability claims, however, are nowhere near exhaustive of the reasons that a person may file a claim for benefits.

A short-term disability policy is essentially meant to protect a person from anything that will prevent them from participating in gainful employment for a period of less than two years, or however long the specific policy mentions that benefits will be paid to the insured.

It’s important to read the policy of any insurance contract carefully, because in the case of short-term disability insurance, a disability stemming from an on-the-job injury will not be covered and the insured will not be eligible for benefits. However, this is covered by other plans offered by the employer, including worker’s compensation.

 


Disclaimer: This information does not constitute financial advice. For specific information for short-term disability policy plans and features, consult your local insurance agent.

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short term disability

Short Term Disability: What Is a Waiting Period?

Few parts of a short-term disability policy are as important as the waiting period; this could be even more important than either the benefit amount or the benefit period to the insured because the satisfaction of the waiting period may determine if the insured even receives the benefits or not.

The waiting period— or elimination period, as it is also commonly referred to– is the amount of time after the onset of an injury or sickness that the insured must wait before receiving benefits. It is the period of time directly before the benefit period– the period in which benefits are to be received by the insured individual.

There are waiting periods for both accident and illness claims and both of these options are chosen by the proposed insured when designing the policy.

Accident Waiting Period

The waiting period for accident claims can be as little as 0 days, meaning they would pay immediately. The proposed insured can pick longer waiting periods and the amount of time chosen for the elimination period will affect the amount of premium paid by the insured. A shorter amount of time before being paid after a claim means more money paid in premiums.

Illness Waiting Period

The waiting period for illness claims can be as little as seven days and issues such as colds and the flu are generally not covered by short-term disability policies. Longer periods can be chosen such as 14, 30, 60, or 90 days for the elimination period for the illness waiting period.

Why Choose Different Waiting Periods?

Again, the waiting period can starkly determine the premium amount. Longer waiting periods can mean smaller premiums. However, this shirks some of the risk to the insured as some short-term disabilities may resolve themselves before the waiting period is satisfied, meaning that the insured has both missed work and not received benefits that he or she would otherwise be eligible for with a shorter waiting period.


Disclaimer: This information does not constitute financial advice. For specific information for short-term disability policy plans and features, consult your local insurance agent.

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short term disability

Short Term Disability: How Much Should I Insure?

So we understand that short-term disability is an insurance that helps you have peace of mind in insuring your ability to make an income should you become sick or injured for a short period of time.

But the question often comes up: “How much should I get?” i.e. How much of a person’s income will they need to replace what they were making when they were working full time, or at least how much should a person insure so they both receive enough in short-term disability benefits to keep up on bills and other payments as well as not break the bank paying monthly premiums when not collecting short-term disability benefits?

The answer? It depends. Remember, with short-term disability insurance, you’re insuring a very important asset. Not your income, but your ability to make an income, thereby protecting your income. That thought must come into consideration when planning for how much of your income you should protect and plan to replace should you be put out of the workforce for a brief amount of time.

Take a moment and consider how much of your income you would be comfortable losing before you would no longer be able to afford excess goods. Now consider how much of your income you could lose before you could no longer afford your mortgage or rent payment. Your utility bills. Your groceries.

Even though I am asking you to think critically about this subject, the industry does have guidelines for how much a person should insure when it comes to short-term disability. A person should spend no more than 1-2% of their annual income on short-term disability premiums. This should give them somewhere in the ballpark of 40-60% gross income.

It’s important to note that gross income is a person’s income before taxes are taken out, in which case you have net income. To determine what your gross income is, take out your last pay stub and add back in the amount of money that was taken out in tax withholdings and other payments such as to a 401(k) and you’ll have your gross income for that pay period. Now use that to find your gross pay on an annualized basis.

 


Disclaimer: This information does not constitute financial advice. For specific information for short-term disability policy plans and features, consult your local insurance agent.

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short term disability

Short Term Disability: Who Pays the Premiums?

When shopping for a short-term disability plan, the premium amounts may catch you off-guard, making you question who’s going to pay for it, especially since most short-term disability policies are only offered through worksite cafeteria plans. There’s a few different options for payment and both employee and employer usually have a say in how this goes.

Reimbursement

Due to rising costs of healthcare, some small businesses may elect to have their employees purchase individual policies (although not usually available for short-term disability) and reimburse a set dollar amount or percentage of the premium to the employee.

Defined Contribution

Another option for business owners is to allocate a specific amount of money for each employee to spend how they want on their benefits. This is called a defined contribution. So an employee may pick a plan that has premiums above the amount specified by the employer to spend, meaning that the employee will have to cover the remaining cost of what he or she chose.

Fully Funded

When an employer pays all of the premiums for an employee’s insurance policy, that policy is considered fully funded.

Employee Funded

Similar to defined contribution in that the employee is funding the insurance policy, this route differs in the percentage contributed by the employee. In this scenario, the employee pays for 100% of the insurance policy. You may wonder what the benefit of getting an insurance policy through a worksite is if you have to cover the entire cost of it. But there are benefits to this option. First, certain insurance plans may be opened up to you that were not allowed on an individual basis. Second, sometimes group rates on different insurance policies are favorable to those offered on an individual basis.

 


Disclaimer: This information does not constitute financial advice. For specific information for short-term disability policy plans and features, consult your local insurance agent.

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short term disability

Short Term Disability: What Does it Protect?

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.

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short term disability

Short Term Disability: What is a Total Disability?

When looking for a short-term disability plan, some of the terms mentioned may be confusing and seem contradictory. One of the terms that may confuse people is total disability, and it may seem hard to distinguish from what a partial disability is when that term is also mentioned. While we’ve already covered what a partial disability is in another post, here we will explore what is meant by the term total disability.

In law, the term total disability means that a disability is severe enough to prevent a person from engaging in “gainful” work. Where as a partial disability means that a disability hinders a person from performing some of the duties of a job, total disability prevents a person from doing enough duties that they would not be able to be or stay employed.

Total disabilities are separated into two types: permanent and temporary.

What is a Permanent Total Disability?

A permanent total disability is any disability that is indefinite and affecting a person enough that the condition prevents the insured person from returning to “gainful” employment. These types of disabilities will not heal over time and will be chronic. When a person is eligible for permanent total disability benefits, they may be able to receive these for the rest of their life.

What is a Temporary Total Disability?

An insured person may seek temporary total disability benefits when they are only unable to return to work for a short period of time. The disability is still enough to prevent the insured from returning to their job, but it will not last permanently. Examples of this might be muscle sprains or broken bones that will heal over time. Once the insured is physically recovered, the benefits will usually cease.

 


Disclaimer: This information does not constitute financial advice. For specific information for short-term disability policy plans and features, consult your local insurance agent.