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Short vs Long Term Disability: When It Rains It Pours

Though I dislike the phrase “when it rains it pours”, the reality is that it does rain and when it does we need an umbrella.  Life brings its share of rainy days.

And instead of pretending that those clouds outside won’t burst into a thunderstorm it’s best to prepare for the worst while hoping for the best.

Rainy days can look like a bad car accident, pregnancy complications or catastrophic illness.  While we know these things can happen, we never think they’ll happen to us.

In continuing our discussion about my chat with HR about disability insurance options, I had the following questions:

  • Does short-term disability conflict with FMLA and when does it kick in?  After or during FMLA?
  • What about long-term disability?
  • When does that kick in and is that a separate policy?
  • Can I obtain that on my own or is it something I can only get through my employer?

Does Short-term Disability Conflict with FMLA?

Let’s refresh.  FMLA covers up to 12 unpaid weeks (unless you use sick/personal/vacation time) away from work due to birth, adoption, or care of a newborn child of the staff member or placement of a foster child.

Short-term Disability typically covers a vaginal delivery or C-Section.  The specifics around percentage of pay rendered during short term disability varies but it is usually around 50-60% of your income.  Your employer may also require that you exhaust your sick/personal/vacation time before utilizing short term disability.  Short-term disability covers you in the event that you are unable to perform requisite duties as dictated by your employer.  The birth of a child covers this requirement.  It is important to note that FMLA protects your job while short term disability protects your income.

Can they conflict?  Typically, no.  They usually work together to cover both your position and income loss during your time away from work.  Depending on your workplace policies this actually works out quite well.  Your employer is required to hold your position while out due to FMLA and short-term disability covers your income.

When Does Long-term Disability Insurance Start?

Long-term disability insurance kicks in after you’ve exhausted FMLA and/or short-term disability.  While short-term disability covers illnesses and injuries that require being out from work for a few months, long term disability covers a few years, think 5-10.  Though, you will want a plan that covers you though age 65.  Long-term disability is usually due to major injury and/or illness which prevents you from earning a living.  As you can see, this would be a problem with a family to support or just needing to pay your monthly bills.  Each policy is different so it is best to check with your plan representative for details.

When securing a policy, check out the following information on how to make sure you’re actually getting what you need and will get what you need should the time come:

Vetting a Policy

If you are thinking about purchasing disability coverage, here are some things to check:

  • Details of what it pays: If it’s a percentage of your income, does that include just your base salary, or other things like commissions?
  • Portability: If it’s being purchased through your employer, can you keep it if you leave?
  • What triggers the benefit: Do you have to be unable to do any job comparable to your own?
  • Limits on payouts: For long-term policies, are benefits for certain conditions, like mental illness, capped? – Washington Post

Can I Get Long-term Disability On My Own?  Is It Only Available Through My Employer?

It is possible to purchase this policy on your own or through your employer.  My employer doesn’t carry this insurance so this is something I would seek outside of the workplace.

  • Figure out what your employer provides. If it pays all, or even a share, of the premiums for disability insurance, that’s your best option. If this is the case, make sure you have both short-term coverage, which tends to last for a few months, and long-term, which often only starts paying after a set time period, often 90 to 180 days.
  • Watch for a possible gap between them, since some employers’ short-term policies may not stretch to when the long-term ones kick in.
  • Even if your employer makes disability a voluntary benefit, with the premium coming out of your paycheck, it’s likely to be a better deal than purchasing an individual policy on your own. Still, particularly if you are young and healthy, you might want to check with an insurance agent.
  • Keep in mind that if you are buying a policy through your employer, you might be able to pay the premiums from your paycheck on a pretax basis. But this will mean you will owe taxes on the payouts you receive after filing a claim. You should also check whether you will be able to keep the coverage if you leave that company.

Read more here about what to look for in a plan from your employer.

Hopefully this was helpful to you.  Researching this topic gave me a lot to think about.  It’s funny, when you’re young, wild and free you rarely think about “catastrophic illness” and how that could impact your ability to earn a living.  Now that I’m older, thinking about the future and protecting is what sits top of mind for me.  Tis the realities of life.

Have you ever had to utilize FMLA, short or long term disability?  Tell us about it below!

 

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