Who Offers Short-Term Disability Insurance?

Short-term disability insurance offers income replacement when an individual is temporarily unable to work due to a non-work-related illness, injury, or medical condition. This type of coverage provides a percentage of pre-disability earnings on a weekly basis, helping to cover living expenses like rent, mortgage payments, and groceries during a period of absence from work. It serves as a financial safety net, allowing individuals to focus on recovery without the immediate burden of lost income. Short-term disability differs from workers’ compensation, which specifically covers work-related illnesses and injuries.

Employer-Provided Short-Term Disability Coverage

Employers often include short-term disability insurance in their benefits packages, providing a portion of an employee’s salary when non-job-related medical issues prevent them from working. Employers can structure these plans in various ways, including self-funded options where the employer directly provides benefits, or insured plans through a third-party insurance company.

The funding for employer-provided plans varies; some employers pay the full premium, while others opt for a contributory model where both the employer and employee share the cost. In some instances, employees may pay the entire premium, often through payroll deductions, for voluntary or buy-up coverage options. The tax implications of benefits received depend on how the premiums were paid; benefits are generally taxable if the employer paid the premiums, but non-taxable if the employee paid with after-tax dollars.

Eligibility often requires specific employment duration or full-time status, sometimes as little as 90 days. Employees typically enroll through human resources during hiring or open enrollment.

Benefits usually replace 40% to 70% of weekly wages. Plans include a waiting period (elimination period) of 7 to 14 days, sometimes up to 30 days, before benefits begin. Employees often use sick leave or paid time off during this period.

Maximum benefit duration typically ranges from 13 to 26 weeks, though some policies extend up to a year. Short-term disability is for temporary absences; long-term disability insurance may provide continued income if a disability extends.

State-Mandated Short-Term Disability Programs

A limited number of states and Puerto Rico operate mandatory temporary disability insurance (TDI) programs, providing partial wage replacement for non-work-related illnesses or injuries. These state-run programs are distinct from employer-provided or private insurance. As of 2024, these include California, Hawaii, New Jersey, New York, and Rhode Island.

California

In California, the State Disability Insurance (SDI) program is worker-funded, with taxes automatically withheld from paychecks. Employees must be unable to perform their regular work for at least eight days and have earned at least $300 from which SDI deductions were withheld during their base period to be eligible. Weekly benefits can range from $50 to $1,300, replacing approximately 70% to 90% of wages, and benefits may be received for up to 52 weeks.

Hawaii

Hawaii’s Temporary Disability Insurance (TDI) law requires most employers to provide coverage, which can be through an authorized insurance carrier or a self-insured plan. The state itself does not administer benefits. To qualify, employees must have worked at least 14 weeks in Hawaii, earning $400 or more, within the 52 weeks preceding disability. Benefits typically cover 58% of average weekly wages, up to a maximum of $837 per week for 2025, after a seven-day waiting period, for up to 26 weeks.

New Jersey

New Jersey’s Temporary Disability Benefits (TDB) program is financed by employer and employee contributions. Eligibility requires specific earnings in a base period. Benefits cover non-work-related illnesses, injuries, and pregnancy.

New York

New York’s Disability Benefits Law (DBL) mandates coverage for most private sector employers. Employers can secure coverage through a private insurance carrier, the State Insurance Fund, or by self-insuring. Full-time employees become eligible after four consecutive weeks of employment. Benefits are set at 50% of the average weekly wage, with a maximum benefit of $170 per week, and are payable for up to 26 weeks after a seven-day waiting period.

Rhode Island

Rhode Island’s Temporary Disability Insurance (TDI) program is funded through employee payroll deductions and employer contributions. To be eligible for 2025 claims, individuals need to have earned at least $18,000 in “base period wages” or meet alternative earnings criteria. Weekly benefits range from $139 to $1,103 and can be received for a maximum of 30 weeks, following a seven-day waiting period.

Private Individual Short-Term Disability Insurance

Individuals can purchase short-term disability policies directly from insurance companies. This is useful for those without employer or state coverage, like self-employed individuals, or to supplement existing plans for more comprehensive protection.

The process of obtaining a private policy typically involves working with an insurance agent or applying directly to an insurer. Unlike group plans offered through employers, individual policies often require an underwriting process. This evaluation considers factors like age, health status, and pre-existing conditions to determine eligibility and premium costs.

When considering a private policy, it is important to review key features. These include the policy’s definition of disability, which outlines the conditions that qualify for benefits, and the benefit period, specifying how long payments will last. Waiting periods, or elimination periods, also apply to private policies, typically ranging from 7 to 30 days before benefits commence. Policyholders also select a monthly benefit amount, which usually replaces 40% to 70% of their income.