Short Term Disability

Most employers will provide some kind of short-term disability insurance. Short-term disability insurance is your stop gap insurance in case of accident or illness that leaves you unable to work. It provides a percentage of your salary (normally between 50 and 60 %) for a period of six months or less. If you require disability for longer than six months, because of a more serious illness or longer convalescence, then you will need long-term disability in addition to your short-term coverage.

Your biggest potential challenge is that the level of insurance coverage may not be sufficient and you need to find that out before you have a problem. Most employers have insurance to cover a short-term sick leave. It only makes sense your employer wants you back and wants you to be able to manage while you are sick. Some states even require employers to provide disability benefits for a full 26 weeks, but that's where the employers obligation ends. However, the percentage of your salary that is provided, the length of coverage and the number of weeks that you have to wait before benefits kick in can all make a difference to your familys financial security while you are sick or incapacitated. It's important to know the details of any short-term disability that your employer provides.

Also, you should know if your employer takes into account other disability programs, like Social Security. If they do, your disability pay could be even lower. Another problem is that you can't depend on actually receiving any benefits from Social Security given today's tougher rules to qualify, even though the possibility of those benefits may have reduced the benefit that you can receive from your short-term disability insurance.

You might think that short-term disability is a waste of your money. You could be wrong. While most of us carry some level of life insurance, you have only a 14 percent chance of dying between 40 and 65. However, in the same age range, you have 1 in 5 chance of having an illness or accident severe enough to need short-term disability. If you have this coverage, your family will have the period of your short-term benefits to figure out next steps. If you don't have this coverage, you could be thrown into an immediate financial crisis. However, if you have 5-6 months worth of salary in the bank (which is highly recommended by most financial planners), you could save some money on the cost of this coverage by only buying minimal short-term benefits.

While any disability insurance can be expensive, heres the good news: If you pay the premiums yourself, the benefits that you receive are usually tax-free.

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