Short-Term Disability Insurance Rates - How Much Does It Cost
If you’re going to get a short-term disability insurance plan from your workplace or a private policy through either a broker or directly through a carrier, you may want to know what the short-term disability rates are. It all depends on the plan that you choose including the coverage you select and the amount of benefits you need, taking into account multiple other factors like occupation and lifestyle. Before getting the cost of short-term disability insurance you must have an estimate of how much money you will have left.
There is no certain amount that a short-term disability insurance provider will pay. So typically you are going to look for a range. Usually, it falls in the range of 50% to 70%. It all depends on the policy you opt for. The percentage can be upgraded to 100% but it depends on your unique situation at the time of claim.
Short-term disability insurance can cover 50% to 100% of your net income. How much you get and the duration it may last depends on your plan and benefit period. It can be anywhere between 15 weeks to 52 weeks. There’s a lot to consider to fully understand all you need to know about Short-term Disability Insurance Rates.
In this article, we will aim to provide you with a better understanding of the short-term disability insurance rates and how much you might get in benefits of insurance paid to you if you are out of work on a short-term disability leave of absence. This guide will put your mind to rest by having the insight into all the nitty-gritty of short-term insurance costs.
Even though you are covered for on-the-job accidents through worker’s compensation, you might not be protected from off the job sickness and accidents. You will still need money to pay for other bills and expenses. That’s where disability insurance kicks in, covering a significant portion of your paycheck in the early stages of a significant illness or an injury. The benefits disbursed as money can be utilized to pay bills for your home and other insurance premiums or simply your medical bills and other routine expenses.
Disability coverage can pay your benefits if you suffer from a covered disability so that you have one less thing to worry about and focus on getting healthy and back to work.
Short-term disability insurance is one of the most important employee benefits. It is designed to replace a portion of your paycheck if you are unable to work due to an off-the-job sickness or accident. As stated by the Council of Disability Awareness, 1 in 4 of today’s 20 years old’s will become disabled for a period of time before they retire.
If you are disabled and unable to work, your paycheck may stop but your financial responsibilities do not. Short-term disability insurance protects your paychecks and is one of the important insurances you can purchase.
Consider short-term insurance for peace of mind and financial protection. Without this coverage, you would be left worrying about how to survive financially in a time when you need to focus on getting better.
If you are relying on your income to meet your expenses, short-term disability is the right plan for you. Recovering from a potential sickness or accident may take up to months and even years. How long could you live off your savings if you are unable to work? Ask yourself that when applying for disability insurance.
What does short-term disability insurance cover?
Short-term insurance covers the following issues such as:
- Back problems
- Knee disorder
- Accidents and surgeries
- Mental illness
- Heart attack
Short-term disability insurance is entitled to cover the disability up to 60 to 180 days and in some cases for one full year. While most of the short-term disability leaves are taken for injuries and maternity leaves, they are also compensated under treatment visits for severe diseases like cancer.
What is short-term disability insurance?
Short-term disability insurance protects your income if a disability or illness prevents you from completing the core functions of your job. Most people do not seriously think about or understand the risk of becoming permanently or temporarily disabled at some point in their lives. The reality is at the age of 40 your chances of becoming disabled for more than 90 days are 50%. Short-term disability insurance pays benefits sooner and for a shorter period of time.
How Does Short-term disability work?
Here are some finer points of how the coverage works. The typical short-term disability plan replaces up to 50% to 70% of your pre-disability earnings. The process of getting a disability plan starts with a claim. You provide the information as well as your personal doctor and employer details. The insurance company then reviews all the submitted documentation and upon approval of the claim paperwork the policy begins to pay you. With such plans, the policy will start paying you after a certain number of days following the disability. Then you will be able to collect benefits for a certain number of weeks perhaps 13 weeks or 52 weeks depending upon your company’s specific plan design.
There are key factors that you should pay attention to:
1. Whether the benefits provided under the insurance are taxable income
2. Whether the plan has a preexisting condition exclusion
3. Benefits for some illnesses may be limited
4. Self-inflicted injuries may not be covered
5. What is the elimination period
It is worth mentioning that the elimination period is the time you are first out of work due to disability. Generally, it is 7 days. You may refer to your insurance provider or employer for clarity.
How much does short-term disability cost?
The cost of short-term disability insurance depends on a number of factors including the type of occupation, health history, and policy choices such as benefit amount. The average cost of short-term disability insurance lies between 1 – 4% of your annual income. Another formula says that you should pay 2 – 6% of your monthly benefit amount as a policy premium.
Generally, the cost of short-term disability insurance is based on:
Typically, insurance companies’ group jobs in a class together to determine benefit and price. They classify the jobs on a scale of 1 – 5, with the higher the number indicating the lower the rate offered by the insurance company. The average premium cost of a 40 year old earning $65000 a year would be $23 to $96 a month depending on the monthly benefit amount and gender classification.
Your age, gender, and health history also determine the cost of your disability insurance plan. Age is the biggest factor that affects cost. According to policy experts, the rate of a policy becomes 5 times more expensive if you purchase it 1 year later than originally planned. So in order to save some money on the premium, you should buy short-term disability insurance at a younger age.
Gender comes next in determining the rate of a policy, with women being prone to higher premium costs. The historical data shows that women are more prone to disabilities than men.
Your health history also determines the rate of your policy for better and worse. At the time of underwriting, you will be asked about your family health history and might be asked to take a physical checkup.When you sign up for a policy, your rates will be lower if you’re in relatively good health.
Another important factor that can affect the rate you pay is if your employer helps you to pay for the policy. This way the cost of the policy will be divided between you two as an employee benefit for you.
These decisions will impact greatly on your disability insurance cost:
- Your benefit amount
- Your benefit period
- Your elimination period
- Any additional riders you select
Should I get short-term disability insurance?
Some of the considerations before purchasing for a short-term disability insurance plan involve:
- Can I continually afford a monthly premium for this disability insurance?
- Can I afford to survive 2 – 3 months without a salary in case of injury or illness?
- What is the amount of monthly premium I have to pay?
According to the BLS, around 43% of private industry employees and 26% of Local and Government employees accessed Short-term disability insurance.
What is the best time to apply for Short-term disability insurance?
The best time to apply for STDI is when you don’t need it. In other words, it is best to buy it when you are young and energetic. The premium cost will be lower and your chances of being covered sooner if you become disabled, will be greater than if you’re older.
What are the conditions that do not qualify for any benefits by short-term disability insurance?
There are certain conditions in which an insurance policy is not entitled to pay for your short-term disability insurance. You should go through the terms before signing up. The common ones are:
- Inability to work due to war
- Inability to work due to participation in a protest
- A time period in prison or jail due to committing a crime
How much disability insurance do you need?
A good rule of thumb says to purchase at least 50 – 60% of your after-tax income. For just a few dollars a month you can help to provide financial security for yourself and those who depend on you. Purchasing short-term disability insurance at a workplace is even simple and affordable. Talk to one of our expert policy advisors to get you on a roadmap towards your disability insurance plan.
It can be a weekly cash benefit paid directly to you. This is the money that can critically support you until you get back on your feet again.
Simply put, you can minimize the cost of your short-term disability insurance by applying at a young age, leading a healthy life, and of course, making careful decisions about policy pick up.
On the high end of things, the cost of your short-term disability insurance could be as high as 15% of your per annual income. This could be in part because your age at the time of policy purchase is higher than 45 years or you are employed at a higher risk job such as at a construction company or firefighting operations. On the lower end, you will be paying less than 1% due to the fact that you are below 30 years of age and employed in a less risky career; office based or a writer, as an example.
When it comes to evaluating the average cost of short-term disability insurance, remember it should be:
- 1 – 4 % of your annual income
- 2 – 6% of the monthly benefit amount
Policy Solver Services
As Policy Solver, we want to help you and your loved ones to live a healthier, stronger, and more financially secure life. You can always have the option to compare different short-term disability insurance with an expert insurance agent from Policy Solver.
Our agents will ask you a few questions to understand your unique situation and will come up with a comprehensive analysis of different insurance plans so they will be able to recommend the best policy at the best price for you. So, what are you looking for? Call us or fill out a contact form, and we will get back to you soon!
- Chances of disability by the council of disability awareness retrieved from: https://disabilitycanhappen.org/overview/
- Leveille, S.G., Resnick, H.E. & Balfour, J. (07 January 2014) Gender differences in disability: Evidence and underlying reasons retrieved from: https://link.springer.com/article/10.1007/BF03339897
- U.S. Bureau of Labor Statistics. (Updated October 26, 2018) Employee access to disability insurance plans. Retrieved from https://www.bls.gov/opub/ted/2018/employee-access-to-disability-insurance-plans.htm
- Disability Statistics and Facts by Affordable Insurance Protection, retrieved from https://www.affordableinsuranceprotection.com/disability_facts