Short-Term Disability Insurance

Short-term disability insurance is one of a range of products designed to protect your income in the event of becoming ill or suffering an injury that takes you out of work for a period of weeks, months or, in some cases, years.

Unlike some other forms of incapacity cover it’s not intended to provide an income for life, but can be useful in the event of an accident or unexpected illness, especially for those who don’t have equivalent cover from an employer. But is it right for you, and what options are available?

What is short-term disability insurance?

Short-term disability insurance is a form of income protection insurance that provides a regular income for an agreed period, if you suffer an illness or injury that leaves you temporarily unable to work.

Examples of where short-term cover is useful could include suffering broken bones or other injuries that result in being unable to perform day-to-day tasks, illnesses that requires a stay in hospital or at home, during pregnancy , or surgery that requires an extended recovery period.

How does it work?

When you take out a short-term disability insurance policy you specify a percentage of your earnings that you want to cover in the event of incapacity (usually around 70%), and you pay the insurer a premium for as long as you want to keep the policy in place.

You will usually set a ‘deferment period’, which is the length of time you’d need to be out of work before payments would kick in.

If you need to make a claim, as long as your situation meets the insurer’s criteria, after the set deferment period you will receive the income as agreed. The income will continue to be paid as long as you’re unable to work or until the payout period is exceeded.

Most policies allow you to make a claim at any time up to your expected retirement date, as long as the level of incapacity meets the conditions as set out by the insurer and you continue to pay the agreed premium.

What conditions does a short-term disability insurance policy cover?

A good policy should cover any disease or injury that causes you to be unfit to perform your usual, day-to-day duties at work. Exclusions will usually include self-inflicted injuries including illicit drug or alcohol misuse, as well as any bodily harm that results from committing a crime.

What should a disability policy cover?

‘Disability’ can take on slightly different meanings depending on context, and there are degrees of incapacity to consider, especially when it comes to insurance cover.

A good policy should cover you not only for your ability to carry out any job, but your ability to carry out your own specific role. So, if you can no longer hold down your current position in your chosen career but are able to take on some other work, you’d still receive compensation in the form of regular payments. This is called ‘own occupation’ cover.

Others policies present a slightly less generous interpretation of incapacity, and will not pay out if your disability renders you unable to perform your original role, but you can still work in the same field in a different capacity. For example, a surgeon who loses the use of his hands and can no longer perform operations, but who can still teach surgery to students.

Very few policies only pay out if you are so incapacitated as to be unable to undertake any work at all, and in such severe cases, short-term cover would be inappropriate anyway.

How does this differ from critical illness cover?

While both disability insurance and critical illness cover are designed to pay out in the event of unexpected illness or injury, the main difference is that short-term disability insurance is paid in regular instalments (like a salary) for an agreed period, while critical illness cover provides you with a lump sum if you are diagnosed with a qualifying condition.

How long does short-term disability insurance pay out for?

As its name suggests, short-term disability insurance only provides a temporary income, and the ‘payout period’ length will be defined by the insurer when you take out a policy.

Typically, this type of cover will provide you with an income for around 26 weeks (approximately 6 months) but some policies only cover 3 months, while others will pay out for 1, 2 or up to 5 years.

An experienced financial advisor, like those we work with, will be able to help you ensure you get the cover you think you’re paying for by comparing policy details and reading the fine print for you. Make an enquiry and we’ll match you with an independent financial advisor.

What is the difference between short-term and long-term disability insurance?

‘Long-term’ disability insurance comes with a longer, or even indefinite, payout period. In theory, your income could be protected for as long as you’d expected to work had you not become disabled.

In other words, long-term disability insurance provides a salary until your planned retirement date. Unsurprisingly, premiums for these policies are therefore likely to be a lot more expensive.

Many employers offer short-term disability insurance, sometimes known as group disability insurance. So if you’re considering getting disability insurance, first check to find out what benefits are already included as part of your employee package. However, disability insurance covered by the workplace usually replaces up to 66% of your salary, and lasts for three to six months.

Getting short term disability insurance as an employee

It’s worth doing an assessment of your financial situation to see if this would really be enough to see you and your loved ones through any period where you’re unable to work. One way to supplement your employee benefits is by getting an additional long-term policy.

Are employers legally required to offer short term disability?

You may be wondering what the laws are for employers and short term disability. Legally, an employer isn’t mandated to provide income replacement for employees on leave due to a short-term disability. However, they are legally obligated to continue with any standard benefits such as statutory sick pay for the days you would have worked.

Private short term disability insurance

You may find that the coverage offered by your employee group disability insurance isn’t sufficient for your monthly expenses. Many people can’t pay off regular expenses on just 66% of their income. If this applies to you, you may want to consider getting private short term disability insurance – especially if you have a mortgage or a family dependant on you earning a full salary.

Which companies offer short term disability insurance?

A quick online search will help you find and compare companies that offer short term disability insurance. A few such examples include: Aviva, British Friendly, Legal & General, Vitality, Royal London, and the Exeter. But bear in mind that an online comparison tool will only offer you a rough idea of price difference. When it comes to insurance, one of the most important factors is making sure the policy is the right match for your needs. You’ll only get the payout if you’ve agreed on the right terms and conditions in the first place.

That’s why financial advisors recommend working through an expert who understands the contract details and can guide you on not just the best price, but the optimal policy terms.

Get in touch and we’ll connect you with an insurance expert.

Why buy short-term disability insurance?

The main advantage of this type of cover is knowing that your financial commitments will be taken care of if you’re temporarily unable to work due to illness or injury, at least for several months.

This can offer some peace of mind while you’re in good health, and it should also allow you to concentrate on getting back to full health without fear of financial hardship should the unexpected happen. It can also be a relatively inexpensive option for the potential benefits.

What are the downsides of short-term disability insurance?

The payments don’t go on indefinitely, so if you suffer a serious illness or injury that leaves you unable to work for life, you will eventually stop receiving benefits and will need to find other sources of income. This could be as soon as three months after receiving your first payment.

That said, if you do return to work the policy will continue and cover you again should you need it.

To protect against this eventuality you would need to take out a more comprehensive policy with an unlimited payout period. And, depending on how long you live, a critical illness policy may also offer greater financial benefits than either long or short-term disability cover.

This is because critical illness cover pays a lump sum instead of a regular income and, once you’ve received it, it’s yours to keep. But if you live for a long time while unable to work, you could also run the risk of running out of funds with a lump sum.

Who needs to take out short-term disability insurance?

Anyone of working age who has ongoing financial commitments should consider short-term disability insurance alongside other forms of income protection cover, such as critical illness, life insurance and other products.

Short-term disability insurance may be particularly important if you don’t have equivalent or similar levels of cover such as those provided by an employment contract, so it’s ideal for self-employed people or anyone who doesn’t receive any paid sick leave.

However, you may want to assess whether you’d be able to cope in the event of long term illness or injury: this may depend on the stage you’re at in your career, the amount of savings you have and your level of financial commitments, etc.

An independent financial advisor can talk you through all of this and inform you of all the options you may find useful. All the experts we work with are independent financial advisors who will be happy to answer all your questions and ensure your income is protected in every eventuality.

Make an enquiry if you’d like us to put you in touch with an expert who can help you find the right product for your needs.

What is the average cost of short-term disability insurance?

Short-time disability insurance is generally more affordable than longer-term cover, but there are no fixed prices and insurers calculate their premiums based on several factors relating to you, your financial obligations and your occupation, specifically:

• The level of cover you want, i.e. how much of your income you wish to protect
• The payout period offered, e.g. 3 months, 6 months 2 years or more
• The type of cover, i.e. own occupation, suited occupation or any occupation cover
• Your occupation: professions with a high risk of injury usually result in higher premiums
• Your age, health and other risk factors as evaluated by the insurer

With so many variables to consider there is, unfortunately, no average cost of short-term disability insurance to use as a benchmark. However, as a rule, it should be cheaper than longer-term cover for any individual.

How do I get a quote?

You should be able to compare short-term disability insurance quotes online, but to find the best rates we recommend speaking to an independent broker.

Make an enquiry and we’ll introduce you to the right expert for a no-fee, no-obligation chat.

Can I get short-term disability cover with a pre-existing condition?

You should be able to take out disability insurance with various pre-existing conditions, but it may result in a higher premium and some insurers may turn down your application. However, in many cases, and depending on the condition, you can still get the cover you are looking for elsewhere.

If you have a health concern that isn’t catered for by most high street insurers, you could also try a specialist that specifically provides for individuals with particular conditions. There are firms, for example, that specialise in short-term disability insurance for knee replacement, high blood pressure and diabetes patients.

The advisors we work with have strong experience of helping clients with a wide range of medical conditions to successfully acquire disability cover at an affordable cost, and are ideally placed to find the right policy for you. Please feel free to get in touch via our online form if you’d like us to put you in touch with a suitable expert.

Short-term disability insurance with no medical

While you won’t normally have to submit to a physical examination before taking out disability cover, all insurers will want to gauge your overall level of health and risk factors before you take out a premium. This will usually be done by means of a questionnaire and may sometimes require input from your GP.

It is likely, however, that you’ll need a medical examination if you need to make a claim on your disability insurance.

Short-term disability insurance and occupation

The nature of the work you do, as well as your employee status, will have an impact on which policies you’ll qualify for and the premium you’re likely to be offered. It’s also likely to influence the choice of features you’re likely to want.

For example, for certain jobs, especially in more highly-skilled professions, it may be more important to you that you can secure ‘own occupation’ benefits for example.

While most insurers will provide cover for all sorts of occupations, some specialise in a particular profession, e.g. short term disability insurance for nurses, firefighters, teachers, pilots and so on.

Can I get short-term disability insurance if I’m self-employed?

Yes, you certainly can, and it may be even more important to do so without the contractual safety net that most employees enjoy.

Don’t forget to set your deferment period (after which the insurer agrees to pay you) to be as short as possible, to allow for the fact that you can’t rely on a period of paid sick leave before the benefit payments kick in: most are set at 30 days.

How can I compare rates and quotes for short-term disability insurance?

You can get in touch with a variety of insurers and ask for quotes, though this would most likely be a very time-consuming and research-heavy process.

One of the best – and quickest – ways to compare premiums is to speak to one of the expert insurance advisors we work with. They have ‘whole-of-market’ access, which means that they can easily find tailored deals and talk you through each one – some of which may not even be available to the public.

Get independent advice about short-term disability cover today

If you’re looking to buy short-term disability insurance for an individual and want to make sure you get the best and most affordable policy for you, the independent advisors we work with are ideally placed to help you find the cover you need. They have the knowledge, experience and tools to ensure you get the right policy for the best possible price.

Make an enquiry today and we’ll be in touch soon to discuss your requirements. The service we offer is free, and there’s absolutely no obligation.