Each individual American faces a significant statistical risk of disability during their career with three out of ten people in this country becoming disabled before they retire. In this context, it's important to understand that disability is not just a physical threat but also a financial one.
It's recommended that every American worker possess savings equal to three to six months' expenses just in case such a disaster occurs. Of course, not everyone does or can save that kind of money.
Thankfully, short term disability insurance exists to protect people without substantial savings or other individuals who couldn't pay bills out of pocket in the event of disability. In the event of a debilitating injury or illness, short term disability insurance pays the policyholder a percentage of their lost wages that varies from about 50 to 70 percent depending on the policy.
The policy makes this payout for a limited period of time that extends from 10 to 26 weeks. As you can see, short term disability insurance is not meant to protect the policyholder in the long term but is instead intended as a safety net helping a temporarily disabled worker meet his or her financial obligations for a brief period of time.
This coverage is often received through an employer or as part of an employee group policy but be aware that if this is the case, there may be some strings attached. For instance, some employers will require a doctor's evaluation certifying disability or may require that a disabled employee first use his or her sick days before the policy kicks in. For this reason, different policies kick in after different waiting periods that vary from one day to two weeks. Typically, employee group policies will start paying benefits faster than employer provided policies because they have fewer strings attached.
No matter how you receive your protection, remember that it is only a stopgap measure and that you can't rely on it for long term protection. It's an important policy to hold but it's important to combine it with a long term disability insurance policy to protect against irreversible disabilities and prevent financial ruin.
The ability to work is the greatest financial asset any individual possesses; protect it with a robust short term disability policy.