What is Short-Term Disability Insurance?

Statera Financial Planners |

What is short-term disability (STD) insurance?

STD insurance is commonly offered by employers as part of their benefits package but can also be purchased as a stand-alone policy. It provides a few months worth (typically between 30-90 days) of coverage if you become ill or injured and need time off of work to recover. It’s different from EI because you are not actually terminated from employment, simply taking a short-term period to recover and resume your responsibilities.

Most companies list their employee benefits—including insurance coverages and limits— but speak with human resources or your boss if you have questions. Keep in mind that most STD insurance plans have a cap on the total monthly amount they will pay out. So, while many policies may claim to pay between 50% to 70% of your salary amount when you are on STD, it may be capped at $2,000 to $3,000 a month. When you qualify for STD benefits, you’ll get a monthly payout to cover everyday expenses like your housing, food, utilities, medication etc., but it’s important to calculate if that is enough to meet your basic life necessities. If there is a need for a top up to the amount, you may want to consider buying a supplementary private disability plan.  It’s also important to remember that no disability policy will ever cover 100% of your current income, as there needs to be some incentive to return to your job within reasonable timeframes.


What does STD insurance cover?

Only once you have an approved STD claim can you access the benefits—that is, the money that replaces your income. It’s key that the illness or disability for which you’re filing your claim with is preventing you from working. Pregnancy may also be covered if you have to stop working due to medical complications before your parental leave.

There are also some things that may not be approved, like stress. However, anxiety and depression resulting from stress may be considered. It’s important to know the definitions within your contract, and Statera Financial Planners can help you understand them if needed.


What happens when short-term disability insurance runs out?

If you aren’t medically capable to return to work but your STD insurance has run out, this is when you would consider long-term disability options. We’ll learn more about this in next weeks blog!


Article details by www.moneysense.ca