Short-Term Disability Insurance (STD) helps replace some of your income for a period of a year or less when you cannot work at all or can only work part-time because of a disability.

To be covered by STD, you or your employer must pay a monthly premium. When an illness or injury prevents you from working and you are running out of sick days at work, you apply for benefits by speaking with your human resources representative or your insurance agent.

STD is not a government benefit and is not connected to any public benefit program. It is private insurance that you get through a private company. To find out if you have STD coverage through your employer, talk to your Human Resources person. To sign up for an individual policy, contact an insurance company or insurance agent.

Most STD policies require documentation from your doctor that explains your condition and estimates how long you’ll be unable to work. Depending on your policy and your medical condition, you may need to report on the status of your disability. There will probably be a waiting period between the date you leave work and the date when you actually begin to get benefits.

Once the waiting period is over, you will generally get a set percentage of the wages you were earning before you were disabled. Although the amount varies, payments are generally around 60% of your previous wage. For example, if you were paid $2,000 per month at work and your policy pays 60% of your pre-disability earnings, you will get a benefits check of $1,200 per month. STD policies generally lasts between 9 weeks and 52 weeks (or 1 year), after which time your benefits will end.

When your STD benefits ends, you may have the option of moving to a Long-Term Disability (LTD) policy or going on Social Security Disability Insurance (SSDI). Some STD plans automatically transition to an LTD plan if you are still disabled after the benefits period ends. The benefits period is the amount of time that you will get a benefits check. If you anticipate needing SSDI, you should apply as soon as possible.

Long-Term Disability Insurance (LTD) helps replace some of your income for an extended period when you cannot work at all or can only work part-time because of a disability.

To be covered by LTD, you or your employer must pay a monthly premium. When an illness or injury prevents you from working and you are running out of other benefits, such as sick days and Short-Term Disability Insurance (STD), you apply for benefits by speaking with your human resources representative or your insurance agent.

LTD is not a government benefit and is not connected to any public benefit program. It is private insurance that you get through a private company. To find out if you have LTD coverage through your employer, talk to your Human Resources person. To sign up for an individual policy, contact an insurance company or insurance agent.

LTD policies require documentation from your doctor that explains your condition and estimates how long you will be unable to work. There will be a waiting period between the date you leave work and the date you actually get your benefits. Depending on your plan, the waiting period can be anywhere between 90 days and a year before benefits are paid. If you get STD and are covered by LTD, your STD benefits may automatically convert to LTD after a certain period.

Once the waiting period is over, you will generally get a set percentage of the wages you earned before you were disabled. Although the amount varies, payments are generally around 60% of your previous wage. For example, if you were paid $2,000 per month at work and your policy pays 60% of pre-disability earnings, you will get a benefits check of $1,200 per month. Depending on your LTD policy, you may get benefits for a set number of years, like 2 years or 5 years, or until a certain age, like 65.

After or during your LTD benefits period, you may want to apply for Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), or other cash benefits programs. Some policies require that you apply for SSDI.

If you are enrolled in SSDI or SSI while also being enrolled in LTD, your LTD benefits may be reduced. The advantage of being enrolled in SSDI or SSI while receiving LTD is that they can help you become eligible for Medicare or Medical Assistance (MA) health benefits, which are not covered by LTD.

Where to Sign Up

You can sign up for Short-Term Disability Insurance (STD) and Long-Term Disability Insurance (LTD) by contacting:

• Your employer’s human resources department if your employer offers disability insurance
• A trade union, alumni organization, or other professional organization you are a member of if they offer group plans
• An insurance agent if you want an individual plan

Note: STD and LTD are not government benefits and are not connected to any public benefit program. It is private insurance that you get through a private company. To find out if you have coverage through your employer, talk to your Human Resources person. To sign up for an individual policy, contact an insurance company or insurance agent.

Group Versus Individual Coverage

One way to get STD or LTD insurance is through an employer, union, or other professional organization. This type of policy is known as group coverage and is your best option. To get coverage through your employer, you usually need to be working a minimum number of hours per week. This is called the “active work requirement.”

Another option is to purchase individual coverage directly from an insurance company or agent. The main reason for getting an individual policy is if you work for an employer that does not offer any STD or LTD policy or the income from the insurance would be insufficient if you did become disabled.

Getting an individual policy is a little more complicated than getting a group policy. You will have to look at different factors before you choose a policy and undergo medical underwriting. You may be denied coverage. These and other issues related to finding and choosing an individual policy are discussed below.

Major Differences in Policies

If you purchase an individual policy, you will pay a monthly premium for your STD or LTD insurance. If you become disabled, the higher your premium, the shorter the waiting period will be, the higher your benefits check will be, and the longer you will be able to continue receiving benefits. Make sure to choose a plan that will meet your needs with respect to these three factors.

If you have a group STD or LTD policy, ask your human resources department about your plan’s waiting period, coverage amount, and benefits period:

• Waiting Period: Sometimes called the “elimination period.” This is the period between the start of your disability and when you are paid your benefits. Generally, policies with longer waiting periods are cheaper. Many plans have different waiting periods for different types of disabilities. For example, a plan may have a 7-day waiting period for illnesses and no waiting period for accidents. For LTD plans, the waiting period is usually between 30 days (or 1 month) to 180 days (or 6 months) after the disability has occurred. Some policies allow you to choose the waiting period.
• Benefits Rates: When you get your individual policy, think about how much money you believe you would need to pay for your essential monthly expenses, such as your mortgage payments or rent, food, utilities, and transportation, if you couldn’t work. Remember that if you develop a disability, you may also have additional medical costs. Try to get a plan that you think will cover your expenses. Most people get policies that pay about 60% of their income prior to becoming disabled. Some policies also change rates during the benefits period. For example, your policy may pay 80% for the first three weeks of disability and then 50% for the remainder of your benefits period.
• Benefits Period:The benefits period is the amount of time that you get benefits if you become disabled. You may want to select a policy to get the longest benefits period that is available. However, the longer the benefits period, the more you will pay in premiums. For STD policies, the benefits period is 12 months or less. For LTD policies, the benefits period can vary between a set number of years, such as 2 years or 5 years, or it can be until a certain age, such as 65. If you have an employer-sponsored policy, but you don’t feel it gives you a benefits period that is long enough, you can buy additional coverage.

Medical History and Pre-Existing Conditions

When you sign up for STD or LTD insurance, the insurance provider will look at your medical history. Insurers look at your medical history differently, depending on whether you are signing up for group coverage or individual coverage.

Group Coverage

For employer-provided coverage, you will be allowed to sign up for the plan during an initial enrollment period. During this period, the insurance company cannot deny you coverage based upon a pre-existing condition, so it is very important to sign up then.

If you have a pre-existing condition when you sign up for your group plan, you may be required to work for a certain period of time before that pre-existing condition is covered by your insurance policy. This period of time is generally between 12 months (or 1 year) and 24 months (or 2 years) and is called an “exclusionary period.”

If you do not sign up during the initial enrollment period, you will have to undergo medical underwriting. The insurance company will review your medical records to find out if you have a pre-existing condition or are getting treatments for a “potentially disabling condition.” Treatments can include advice from a doctor or a medication. If the insurance company finds that you do have a health condition or have received treatments, the insurance company can deny you coverage, exclude conditions from being covered, or have an exclusionary period for your conditions.

Similar rules apply to other types of group coverage that are not employment-based (like group policies through a trade union or professional organization). There may be specific periods of enrollment, insurance companies may be able to deny coverage based on health conditions, and there may be exclusionary periods for pre-existing conditions.

Individual Coverage

If you want individual coverage because you do not have access to group coverage or because your group coverage offers small cash benefits or doesn’t give you benefits for long enough if you do become disabled, you will also have to undergo medical underwriting.

The insurance company will review your medical records to find out if you have a pre-existing condition or are receiving treatments for a “potentially disabling condition.” Treatments can include advice from a doctor or a medication. If the insurance company finds that you do have a health condition or have received treatments, the insurance company can deny you coverage, exclude conditions from being covered, or have an exclusionary period for your conditions.

When to Sign Up

The sooner you sign up for disability insurance, the better. With employer-sponsored plans, you should sign-up during your pre-enrollment period, also called the initial enrollment period. With other group policies, you may have to be a member of the group for a period of time before you can in enroll in the plan. Once you become eligible to enroll, sign up as quickly as you can to avoid exclusionary periods or the exclusion of specific conditions.

If you are interested in purchasing an individual policy, you should sign up as young as possible. Young people pay lower premiums and if you purchase disability insurance at a young age, you may be able to get a “non-cancelable” policy, meaning that your coverage can’t be canceled and your premiums can’t be raised as long as you pay your premiums on time.

Getting Benefits

If you get injured or become ill, contact your human resources department or insurance agent as soon as possible to begin the application process. You are eligible to get disability benefits if you cannot work for any health-related reason; your injury or illness does not have to be work-related.

Once you apply for cash benefits from your disability insurance plan, there is usually a waiting period before you can begin to get benefits. For Short-Term Disability Insurance (STD), the waiting period is typically a few days, but can be as long as a month or more. Many policies also require you to take your sick days before you are allowed to collect your benefits.

The Long-Term Disability Insurance (LTD) waiting period typically is at least 30 days, but can be as long as a year. Many disability insurance policies offer shorter or longer waiting periods. Generally, the lower your premium is, the longer the waiting period will be.

Once the waiting period is complete, you should get your benefits check about a month later.

The Benefits

Each policy has a different way of figuring out how much money you will get. Some send you a set dollar amount, while others give you a percentage of the wages you made before becoming disabled. Depending on your plan, bonuses, tips, and commissions from your job may or may not be included in the calculation of your wages.

Depending on how your disability insurance is paid for, your benefits may or may not be taxed when you get them. If your employer paid your premium, you usually will have to pay taxes on your benefits. If you paid for an individual policy with your own taxed income, you probably won’t have to pay taxes on the benefits. Contact your income tax professional or human resources department for more information.

Public Disability Benefits

While you are getting private disability benefits, you may want to apply for public benefits like Social Security Disability Insurance (SSDI). For example, if you know that your LTD will soon end, it is important for you to apply for SSDI as soon as possible.

If you get benefits from other programs, like SSDI or Supplemental Security Income (SSI), at the same time as you get STD or LTD, most private disability insurance policies will reduce your benefits by the amount those benefits programs pay you. For example, if your LTD benefits check is $2,000 per month and you begin to get an SSDI check for $800 per month, your LTD benefits will be reduced to $1,200 a month.

Some LTD policies even require you to apply for SSDI. Once you are approved for SSDI, your private disability insurance benefits may not be automatically or immediately reduced. As a result, your disability insurance policy provider may overpay you. If you are overpaid, you will be required to pay back the difference.

The advantage of being enrolled in SSDI or SSI while getting disability insurance is that they can make you eligible for Medicare or Medical Assistance (MA), health coverage which isn’t provided by disability insurance.

Health Coverage

STD and LTD insurance gives you money, not health coverage. For the first 12 weeks that you are unable to work due to a medical condition, you may still be entitled to be covered by your employer's benefits (including your employer's health plan) under the Family and Medical Leave Act (FMLA).

In order to be entitled to continuing coverage, you must still be employed at your organization. The FMLA allows you to get up to 12 weeks of unpaid leave for a medical condition or for care for a family member with a medical condition if you have been employed at the organization for at least 12 consecutive months prior. During the leave, your employer must continue to offer you the health benefits they offered prior to the leave.

Even though this leave will be unpaid, during your FMLA leave you can still get paid if you use sick time, vacation time, or you get STD benefits. Click here to read more about the FMLA. After the 12 weeks of leave, your employer has the right to let you go if you are still unable to return to work. If you want to continue to get your health coverage through your employer’s health plan after you are laid off, you can continue that coverage by paying out of pocket for COBRA.

Another option for private health coverage is to find an individual plan on MNsure. Depending on your situation, the government may help pay for your premium for an individual plan through tax subsidies. Or, you may become eligible for public health coverage like Medical Assistance (MA), Medicare, or MinnesotaCare. To learn more about different health coverage possibilities, see DB101's Health Care Coverage section.

In addition to different waiting periods, benefits periods, and benefits rates, which are described here, Short-Term Disability Insurance (STD) and Long-Term Disability Insurance (LTD) policies can vary in other aspects. These details are important because they can have a major impact on your benefits if you become disabled.

Definition of Disability

Disability insurance providers think about disability in two ways:

1. Own-Occupation Disability (or “Own Occ” ) means your disability prevents you from performing your own occupation, that is the work or job you have been trained to do and have experience in
2. Any-Occupation Disability (or “Any Occ”) means your disability prevents you from performing any occupation

Own-occupation insurance policies pay you if you are unable to perform your own occupation, even if you are able to get a different type of job. They have higher premiums than policies that require you to be unable to perform any occupation.

Trial Work Period

Policies may allow you to return to work on a trial basis. For example, your policy may give you a two-week trial period. If you go back to work for less than two weeks and then find that you can’t do your job because of your disability, the policy would allow you to continue your benefits as if you hadn’t returned to work. If you are able to return to work and then you find that the same disability again prevents you from doing your job, your policy may or may not require another waiting period.

Part-Time Work

Some plans allow you to return to work part-time while continuing to pay your benefits. This is usually referred to as a “residual” or “loss of earnings” benefit. When an employee returns to work part-time, wages for hours worked are paid by the employer and STD or LTD replaces the regular hours not worked at the pay replacement level.

For example, if you worked 8 hours per day before your disability, and you are able to return to work 4 hours a day, the disability insurance policy may replace some of your income for the remaining 4 hours.

Changes to Your Premium

Under “non-cancelable policies,”" your premium can never be raised above those shown in the policy. Also, the policy cannot be canceled as long as the required premiums are paid on time.

Under “guaranteed renewable policies,” your premium can be raised, but only if the change affects an entire class of policyholders. Initial premiums for guaranteed renewable policies can be less expensive than non-cancelable policies.

Other less expensive policies that are "guaranteed renewable policies" or have limited premiums are also sometimes available.

Cost of Living Adjustment (COLA)

Some LTD policies allow you to buy a cost-of-living-adjustment (COLA) to add to your basic disability income coverage. This additional benefit raises the income you get from your insurer by a certain percent each year. For example, if you become disabled and are unable to work, the COLA will gradually raise your benefits to match the higher prices of rent, food, utilities, medical, and other expenses.

Other policies don’t include COLA, but do allow you to buy additional coverage over time as your household expenses go up, without having to undergo any additional medical underwriting.

Exclusions

Many policies will not cover disabilities caused by suicide attempts, drug abuse, war, or attempts to commit a crime. Pre-existing conditions are also frequently excluded, as was discussed earlier in this article. On-the-job injuries, which are covered by workers’ compensation insurance, are also not covered.

John's Story

John is unemployed. In January 2010, he goes to the doctor because his back is hurting. The doctor prescribes some painkillers and sends him home to rest. In February, John gets a job and signs up for Long-Term Disability Insurance (LTD).

A month later, he gets a letter from the insurance company about his LTD. It explains that he will have a 2-month service wait. This means that he will have LTD coverage starting April 1, 2010, two months after the date he was hired. So, if John is injured between February and April, he will not be able to apply for LTD benefits. The LTD policy is an “Own Occ” policy, which means that John has to be unable to work in his own occupation, that is, the work John was trained to do and has experience in, to be defined as disabled in order to get benefits.

The letter goes on to explain that his back injury is a pre-existing condition, and that he will have a 1-year exclusionary period. The exclusionary period begins on the same day of his coverage, April 1, 2010. If he becomes disabled due to his back injury between April 1, 2010, and April 1, 2011, he will not be able to collect LTD benefits.

In May 2011, John hurts his back and can no longer go to work. Since the waiting period and exclusionary period are over, John can begin to get LTD benefits. He knows that it may take a while to get his first LTD check, so he immediately contacts his Human Resources manager. The manager tells him that there’s a 60-day waiting period from the date of disability before his benefits begin. John will start getting his benefits on July 1, 2011.

John was making $2,000 a month before he hurt his back again. His policy pays 50% of pre-disability wages for up to five years, so John will get $1,000 a month from LTD until he is no longer considered disabled or 5 years have passed, whichever is shorter.