Disability insurance replaces your income if you're injured or unable to work. If you’re only disabled for a short time, some states offer temporary disability insurance for free. Temporary disability insurance is only available in five states and one U.S. territory: California, Hawaii, New Jersey, New York, Puerto Rico, and Rhode Island.
Temporary disability insurance isn’t meant to replace your income and only covers disabling conditions that occurred outside of work. As a government-sponsored or administrated social benefits program, it functions as the cousin to workers’ compensation, the policy which pays benefits if you’re injured on the job. The best way to protect your income is with a long-term disability insurance policy.
How to qualify for temporary disability insurance
If your state offers temporary disability insurance, qualifying for it shouldn’t be too difficult. You only need to be out of commission due to a condition you acquired outside of work. (For injuries that occur on the job, you need to apply for Workers’ Compensation instead.) But the condition doesn’t need to be completely disabling – in fact, there is the expectation that you’ll return to the workplace in due time. For that reason, temporary insurance only replaces a tiny part of your income.
Temporary insurance is expressly for disabilities that you’ll quickly recover from. One of the most common conditions for which people claim benefits isn’t a disability at all: many people claim temporary disability for pregnancy and childbirth.
In some cases, you can claim both Workers’ Compensation benefits and temporary insurance benefits, although you had to have been receiving Workers’ Compensation benefits prior to your temporary insurance benefits claim. Not all states allow this overlap, so check with your state’s workers’ compensation administration.
Temporary disability insurance vs. short-term disability insurance
Temporary disability insurance is a kind of short-term disability insurance. The difference is that the product called short-term disability insurance is offered by a private insurance, while temporary disability insurance is simply a requirement by the state that you be paid a small sum if you can’t work for a short time.
People who purchase short-term disability insurance almost always do so through their company’s employee benefits program. Short-term disability insurance pays out much higher benefits than temporary disability insurance, but neither provides the coverage you might need if a disability puts you out of work for a long time. For that, you need long-term disability insurance, which, depending on the policy you purchase, could continue paying out even if your disability is permanent.
Both short-term and temporary disability insurance cover only short periods of disability. If you're looking for coverage, a licensed agent at Policygenius can help you find a long-term disability policy that suits your needs and could pay out until you retire.
Temporary disability insurance vs. Social Security disability insurance
Temporary disability insurance is also similar to Social Security disability insurance (SSDI) The main difference here is that to qualify for SSDI, your condition has to be so disabling that you can’t be expected to do any other work. It’s not unheard of for people to be put out of their career by a disability only to be denied Social Security disability benefits because they can do other work, even if the work pays a far lower salary.
Temporary disability insurance is easier to qualify for than SSDI, but mostly because you’re not expected to be permanently out of work. Temporary disability insurance benefits are also considerably lower than those offered under SSDI because companies who offer it anticipate you returning to work after you recover from your condition.
Why you need more coverage than temporary disability insurance
In terms of replacing your income for the entire time you’re out of work, temporary disability insurance just doesn't cut it. Seeing as the average disability lasts three years, long-term disability insurance is the best option. Disability insurance costs between 1% and 3% of your income.
Temporary disability insurance isn’t meant to replace your income. It may not even be enough to pay for the medical expenses you may incur while disabled. If your state offers it, you should absolutely take it if needed, but you can’t rely on it as a permanent solution.