Short Term Disability Insurance Pros and Cons

August 9, 2013

short term disability insuranceAs Americans, we are proud of our ability to work. We like knowing that can provide for our families. However, what happens when an illness or injury prevents you from going to work? What happens to your income in those cases?

While your health insurance policy might cover the costs associated with treating the injury, or with hospitalization, this type of insurance can’t replace the income you lose when you can’t go into work. For that sort of help with your financial situation, you need short term disability insurance.

What is Short Term Disability Insurance?

The point of short term disability is to provide you with income in the event that you are unable to work temporarily. It’s important to understand that short term disability is specifically meant for situations in which you are hurt and there are no other sources of insurance coverage.

For instance, if you are injured at work, your company’s worker’s compensation insurance will cover the costs involved. If you are injured by someone else in a car accident, the other driver’s liability insurance will cover your costs. Disability is meant to help replace your income when you are sick for a long period of time, or injured in some way that isn’t already covered.

The Pros and Cons of Short Term Disability Insurance

Before you decide to buy short term disability insurance, it’s important to understand the pros and cons involved. Here are some things to think about:

  • Pros: Short term disability can provide you with some income if you can’t get to work due to sickness or injury. In many cases, you can receive between 40% and 65% of your income. This can be a great help as a supplement to your emergency savings while you are unable to work. In some cases short term disability can be very affordable, especially if it is offered as a group plan through your work.
  • Cons: There are downsides to short term disability insurance, however. First of all, there are usually caps on your coverage. You might only receive up to a certain total amount of help for your income. Additionally, there might be a cap, anywhere between three months and two years, that limits the amount of time you can receive disability insurance. It’s also important to consider the requirements. There might be a waiting period of between seven days and 30 days before you start receiving benefits, depending on the policy.

As with all insurance policies, it’s important to carefully consider your needs before committing. Short term disability is meant to shore you up during a temporary crisis. If you plan really well, you might be able to build up your emergency fund to a point where you could cover your needs on your own in the event that an illness or injury prevents you from going to work. However, if you aren’t sure of your emergency fund’s ability to handle the problem, you need to consider short term disability insurance.

And, as always, read the fine print. Find out if there are conditions or circumstances that disqualify you for payouts, and make sure you understand any waiting periods and caps. When integrated with the rest of your overall financial plan, short term disability insurance can be a great help and provide you with peace of mind. Just make sure it’s right for you first.

Do you have or think you need short term disability insurance? Leave a comment and tell us your story!


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Miranda writes about personal finance almost every day. An experienced freelance writer, she's covered your money online and in print from every angle and is always looking for new ones.

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One Response to Short Term Disability Insurance Pros and Cons

  • Kevin H @ Growing Family Benefits

    Almost any working woman planning to have children in the future can benefit from buying a policy.

    Normal childbirth is a qualifying condition, along with complications of pregnancy that occur prior to delivery.

    Many in the media complain about the lack of paid maternity leave in the U.S. Short term disability fills that need, but nobody seems to know that.