How Short-Term Disability Benefits Work

Whether an incident takes place on the job or after hours, everyone bears some risk of becoming incapacitated, unable to work, and in need of assistance from short-term disability insurance coverage.

This coverage provides financial support to replace lost income while you take time off to recuperate at home. Without this insurance, the financial burden of medical expenses and lost wages can be overwhelming, so ensuring you have adequate coverage can provide peace of mind during unexpected life events.

Why Are Short-Term Disability Benefits Important?

While becoming injured or ill does happen at home and other places, a surprising number of disabling incidents happen in the workplace in any given year, creating a substantial need for disability insurance coverage.

A 2024 report released by the union organization AFL-CIO found that in 2022, approximately 344 workers died each day from hazardous work conditions, and some 5.6 million to 8.4 million worker injuries take place each year, often going unreported.

According to the Council for Disability Awareness, around one-quarter of today's 20-year-olds have a chance of becoming disabled at some point in their career before retirement. Some people with disabilities will require more support than the amount provided by short-term disability insurance. On average, long-term disability incidents last about 34.6 months, meaning almost three years of lost work and foregone income.

Short-Term Disability Benefits

Employer-provided short-term disability (STD) insurance pays a percentage of an employee’s salary for a specified amount of time, if they fall ill or get injured, and cannot perform the duties of their job. Generally, the benefit can pay up to 60% of the employee's weekly gross income.

Independently purchased short-term liability insurance works relatively the same, offering a range of partial to full income coverage, depending on the policy level and premium you choose to pay.

When Coverage Begins

While most employers can decide when the benefits would kick in, coverage usually starts anywhere from one to 14 days after an employee suffers a condition that leaves them unable to work.The time of coverage may vary from nine to 52 weeks from eligibility. Many times, employees are required to use sick days before short-term disability kicks in if it’s an illness that keeps them out of work for an extended period.

Employers often have other types of insurance that cover workplace injuries, such as workers' compensation, with different rules and requirements, versus disability insurance for those injuries that occur off the job. If an employee must be out of work for longer than the short-term disability benefits coverage period, then either a long-term disability plan or permanent disability kicks in. This transition typically occurs between 10 to 53 weeks from the date of eligibility.

Who Pays for Short-Term Disability Coverage?

A short-term disability policy can be an employer- or employee-paid benefit. Generally, though, employers offer short-term disability coverage as a benefit.

Companies do have a choice of having employees pay for coverage, with certain tax implications. Each state sets its own requirements as to whether employers must carry short-term disability insurance and the mandated limits of basic coverage amounts. States can also dictate the amount of the weekly cash benefit limits. Group coverage for short-term disability can be attained in the following ways:

• Contract agreement through an insurer that covers disability.
• Through a self-funded plan agreed upon by the employer directly. (Two popular providers include Aflac and MetLife.)

Policy Terms and Responsibilities

As an employer, you can create a policy dictating that employees use sick days before going on short-term disability for an extended illness. You can also require documentation from a doctor to prove an illness or injury.

During the time that an employee misses work, the employer may also request that the employee visit an approved medical provider or an occupational medicine center for regular updates on the progress of the employee's health.

A third-party claims administrator will be in charge of managing these aspects while the employee takes time out of work. Employees must report any changes in their status immediately. These rules are in place to help prevent insurance fraud, a problem that costs employers billions of dollars annually.

Various short-term disability plans dictate different terms for qualifications. The main terms typically include:

• Employees need to work for the employer for a certain amount of time before coverage kicks in.
• Employees need to work full-time, usually 30 hours or more a week.

The following components may be included in a short-term disability plan benefits package:

• Percentage of weekly salary paid out (typically up to 60% of weekly salary).
• Duration of short-term disability benefits (typically between nine to 52 weeks).
• The maximum amount of time covered under the disability program (up to 52 weeks)

It’s also important to know the rules of the states in which employees reside.

Employers may want to also consider offering a voluntary benefit option for a long-term disability program that takes over once an employee’s short-term disability ends.

Frequently Asked Questions (FAQs)