Short-term disability insurance

If you’re unable to work for a short period of time due to a disability — an injury or illness — short-term disability insurance will replace your income while you recover. The exact definition of a disability will be outlined in your insurance policy. The length of time that short-term disability insurance lasts — the benefit period — is typically between three and six months, and is often offered through employers as a benefit to employees.

How does short-term disability insurance work?

Short-term disability insurance plans provide up to 60% income replacement while you’re unable to work. After submitting a claim, there is an elimination period before you'll start receiving benefits. The elimination period for short-term disability insurance policies is usually under 14 days.

You will receive benefits for the duration of the benefit period for as long as you fit your policy’s definition of disabled.

If you (or your employer) pay the premiums of the policy with pre-tax money, the benefit is taxable. If the premiums are paid with post-tax dollars, the benefit is non-taxable.

Average cost of short-term disability insurance

Short-term disability insurance can be comparable in cost to long-term disability insurance. However, it’s oftentimes more economically feasible to get a short-term disability policy through your employer (sometimes called voluntary disability insurance) who may offer it for free or at a low cost, rather than paying the full cost on your own for a relatively limited policy.

If you buy a policy privately, the cost of a short-term disability policy depends on several factors, including:

• Age, gender, and health

• Coverage amount, benefit period, and elimination period

• Income/occupation

→ Find out if short-term disability insurance is right for you

Short-term vs. long-term disability insurance

The main difference between short-term disability insurance and long-term disability insurance is the benefit period. Long-term disability insurance policies are designed to last for many years, sometimes until retirement, while short-term disability insurance protects for under a year. The total benefit for short-term disability is therefore smaller.

Despite the different lengths of coverage, short-term and long-term disability insurance policies can cost the same, between 1% to 3% of your income.

Short-term and long-term disability insurance policies work to complement each other. Short-term disability insurance protects your immediate income needs, while long-term disability insurance is there if you need longer periods of coverage. There is usually little overlap between them, because you have to exhaust your other disability insurance options before your long-term disability insurance kicks in.