While the FMLA protects your job, it doesn't replace your income. For that, you need disability insurance, which can work in tandem with the provisions of the FMLA.
Published October 11, 2018
The Family Medical Leave Act (FMLA) allows eligible employees to take up to 12 weeks of unpaid leave to bond with a new child, recover from an illness, or because the employee is pregnant. The FMLA is a federal law, but some states have more robust medical and family leave laws that may include paid leave and longer periods of time off.
While the FMLA protects your job, it doesn’t replace your income. Even in the handful of states that require employers to offer paid leave, you may not be reimbursed your full income, or the paid leave period may be limited in length. To more fully replace your income while you’re out of work for an extended illness, you need disability insurance.
Short-term and long-term disability insurance can work in tandem with FMLA leave by replacing your income during the period which you are not being paid. Disability insurance can also pay benefits long after your FMLA leave expires. If you live in a state that mandates paid leave, disability insurance benefits may help you recoup your lost wages where the law’s requirements fall short.
Long-term disability insurance (LTDI) replaces your income for a number of years when you become disabled and lose your ability to earn an income. It’s called “long-term” because it has a benefit period that’s at least five years long and which can go as long as to retirement age if you’re willing to pay more.
Long-term disability insurance benefits replace around 60% of your pre-tax income, roughly the equivalent of your take-home pay. If you become so ill or disabled that you can’t ever return to work, LTDI benefits can keep you whole for decades.
However, LTDI typically has a long elimination period, which is the time you have to wait after becoming disabled before your benefits kick in. The most cost-effective elimination period is 90 days. To make sure you’re getting the right amount of coverage for the right amount of time, talk to a licensed representative at Policygenius about your options when shopping for disability insurance.
Unless you choose a shorter elimination period when you purchase your long-term disability insurance policy, you likely won’t start receiving disability insurance benefits until after your FMLA leave period has ended.
Still, if you’re an eligible employee, the FMLA protects your job while you’re waiting out the elimination period. If you recover from your illness or disability before the LTDI benefits start, then you get to go back to work and resume earning your income as normal. But if your disability extends past the FMLA’s 12-week allotment, then you’ll start receiving disability insurance benefits from your insurer as long as your elimination period ends around that time. Just be sure to file your claim as soon as possible after you become disabled, as the claim process can take up to 60 days (although the elimination period will start the day you become disabled).
Under short-term disability insurance (STDI), your benefits period is much shorter, typically just a few months to one year. While you can usually get a similar amount of benefits if you’re willing to pay higher premiums, STDI’s shorter benefits period may leave you without coverage if your disability is particularly severe. It’s also difficult to purchase a private STDI policy; most people get short-term disability insurance from their employer.
Short-term disability insurance has a major advantage over LTDI in that it has a much shorter elimination period. Some people who get STDI through their employers purchase a separate LTDI on their own so that the elimination periods stack: your LTDI benefits could begin around the time your STDI benefits are expiring.
Because of the shorter elimination period, it’s sometimes possible to start receiving short-term disability benefits while on FMLA leave. In this case, you’re receiving job security from FMLA and monthly benefits payments from STDI. Make sure your STDI coverage has a benefits period long enough to meet your coverage needs, and if it’s not long enough, look into an LTDI policy to make up the difference.
You’re eligible to receive disability insurance benefits as long as you meet the insurer’s definition of disability. Your coverage usually extends to both pregnancy and childbirth, which are considered disabling conditions. But many of the situations under which you’d be eligible for unpaid FMLA leave, like caring for an adopted child, do not apply to disability insurance. Generally, you can’t file a claim for benefits if you’re physically able to do work.
When you apply for private disability insurance, any pre-existing conditions you have may be excluded from coverage — if one of them causes your disability, you won’t be able to file a claim for it. This isn’t the case with FMLA leave. As long as you’re eligible, you’re allowed to take the full 12 weeks even if the leave was the result of a pre-existing condition.
Social Security disability insurance (SSDI) is a government-run program that pays you benefits if you become disabled and lose your job, just like private disability insurance but with smaller payments. It doesn’t cost anything to sign up for SSDI, but acceptance rates are low, and you may want to purchase a disability insurance policy anyway to ensure full coverage.
While you can apply for SSDI as soon as you become disabled, you can’t receive SSDI payments concurrently with your FMLA leave, since you’re still technically employed. Approval can also take months or even years.
But if your condition worsens and you lose your job, you become eligible to start receiving Social Security disability insurance benefits. (The Social Security Administration allows you to earn a certain amount of money while collecting SSDI benefits, the threshold of which is called “substantial gainful activity.”)
Additionally, the Social Security Administration also typically grants awards only to people whose disability is expected to last 12 months, or which has already lasted 12 months, in which case your FMLA period would have long since ended.
Disability insurance is a great idea for anyone who wants to protect their income, like highly educated professionals with a ton of student loans to pay off, or people with mortgages and other types of secured debt obligations. But if you can’t afford disability insurance, you may still be eligible for paid family or medical leave if you live in certain states.
Every state has its own laws for governing who’s eligible for paid leave. Like the FMLA’s own provisions, your employer is only required to offer paid leave if they employ a certain amount of people. Additionally, the length of time you can take off varies by state, as does the amount your employer is required to pay you.
For example, in New Jersey, you get six weeks of family leave paid at two-thirds of your usually income, with a maximum, as of 2018, of $637 per week. In Oregon, you accrue one hour of paid sick leave for every 30 hours you work (and one and one third hours for every 40 hours worked), but you should be eligible to receive roughly the usual income you would’ve earned during that time minus tips, bonuses, and commissions.
Paid family leave isn’t necessarily for medical conditions, but for bonding with a newborn child in the first weeks or months of its life, or with a foster child or adoptee as he or she begins living in your home. In addition to the FMLA’s 12 weeks of unpaid leave, the following states offer a certain number of weeks of paid family leave:
As with paid family leave, be sure to check with your state’s laws to determine eligibility for paid medical leave. The following states have some kind of paid sick leave laws on the books:
The following cities offer paid sick leave even while the state at large does not:
Minneapolis, and St. Paul, Minnesota
New York, New York
President Barack Obama’s executive order No. 13706 requires all employers who contract with the federal government to offer paid sick and family leave to their employees.
Zack Sigel is a SEO managing editor at Policygenius. He covers personal finance, comprising mortgages, investing, deposit accounts, and more. His previous work included writing about film and music.