What is short-term disability insurance?

It provides partial income replacement when employees can't work due to covered illness or injury, typically for 3-6 months.

Short-term disability insurance is a type of coverage designed to protect employees from the loss of income due to a temporary inability to work. This coverage kicks in when an employee encounters a medical condition — whether it’s an illness, injury, or surgery — that prevents them from performing their job duties. Typically, after a waiting period that could range from a few days to a couple of weeks, the insurance policy starts to compensate with a portion of the employee's usual salary. The exact amount and duration of the benefits can vary depending on the specific policy, but usually, the coverage lasts anywhere from three to six months. This type of insurance is crucial for employees who rely on their paycheck for everyday living expenses, providing financial support during difficult times when income might otherwise be interrupted.

Imagine Jane, a marketing manager at a mid-sized firm. Jane is very active and enjoys running, but one day, she injures her leg and requires surgery, which doctors say will keep her out of work for at least two months. Fortunately, her company provides short-term disability insurance as part of its employee benefits package. After a two-week waiting period, the insurance begins to pay her 60% of her regular salary. This helps Jane cover her rent, utilities, and other essential expenses while she focuses on recovering and returning to work, without the added stress of financial instability.

If your employer offers short-term disability insurance, take the time to understand what your policy covers, including the waiting period, percentage of income coverage, and duration of benefits. If you're self-employed or your employer doesn't provide this benefit, consider purchasing a policy independently. It's also a good idea to build an emergency fund to cover potential gaps between the onset of your disability and the start of the insurance payout, ensuring financial peace of mind during unforeseen health challenges.