Short-Term Disability Insurance Explained

If you work for a big company, there are probably lots of charges and taxes taken out of your paycheck each week. You might make charitable contributions, pay your medical plan premium, or use certain tax deductions through your payroll service. In this list, you might see the pay code “STI” or “STD,” which both represent short-term disability insurance. This is a great plan to have because it can protect your paycheck and save you time researching Iowa workers compensation law if that’s the state you live in. Some people have and don’t know it, and others aren’t sure if they should purchase it, so knowing the basics could help you make a decision on whether to get or keep your short-term disability insurance.

What Is It?

Disability insurance is a way to protect your paycheck in case you can’t work. You keep insurance on your car, home, and self, so why not insure your paycheck too? The most popular type of policy is a short-term disability policy because this can cover you for anywhere from a few weeks to two years of being out of work. The plans pay a percentage of what you were making each week, typically around 60 percent of your gross income. They keep the payments at a little less than your full income to encourage people to go back to work when they’re able. The benefits can be paid biweekly or monthly; the frequency is typically established in your policy contract. There are also policies that cover long-term disability, but these aren’t as popular.

How Does It Work?

Short-term disability insurance was created to protect both the employee and the employer. The key to remember with this insurance policy is that it usually covers only off-the-job accidents. Meaning if you get hurt over the weekend while water skiing or are hospitalized with a sudden illness, your insurance will kick in after a brief waiting period. If you’re injured on the job, then your company’s workers compensation policy will have to cover the incident. Short-term disability helps employees because it secures your paycheck when you can’t work, and helps employers because it greatly reduces the chance an employee would fake an accident at work to get coverage for something that happened off the job.

Opting into a company or supplemental short-term disability plan can give you the peace of mind to know that your paycheck is still coming in even when you can’t work.

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