Short-term Disability Insurance vs. Temporary Disability Insurance

Understand the Differences

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Worrying about life and whether or not your family will be secure if something happens to you? You are not alone. The good news is that a majority of employers offer employees either short-term disability insurance(SDI) or temporary disability insurance (TDI). These are financial products that provide a portion of your lost income if you become disabled and cannot work. There are also some employers that offer employees both types of coverage based on the industry in which they work. What are the differences between each type of insurance?

We will discuss that, as well as the pros and cons for each type of insurance. 

What is Short-Term Disability Insurance?

There are quite a few companies out there that provide their employees with this type of insurance as part of the benefits package offered when hired. There are also some people who purchase this type of insurance on their own, separate from their employment if it is not offered by their employers.

The federal government does not provide workers with any SDI benefits through Social Security, but because of federal laws, employers are required to provide employees with some form of unpaid leave (such as a workers' compensation leave or FMLA). 

In simplest terms, a short-term disability insurance policy will pay you a portion of your salary after you use up all of your available sick days because of an illness or injury not suffered at work. Depending on the type of plan you have, you could be paid for up to 52 weeks.

What is Temporary Disability Insurance?

Temporary disability insurance is required by the governments of some states to be offered to employees by their employers. This type of insurance provides coverage for employees who have suffered an injury or illness outside of where they work and cannot perform their job duties because of it.

Any injuries or illnesses suffered on the job are not covered by TDI, but instead by workers’ compensation benefits. TDI will also cover lengthy leaves of absence from work due to pregnancy and childbirth.

A TDI policy will typically pay you up to 60 percent of your salary while out on leave for a period of three to six months. Should you still not be able to work after this time frame, you might be eligible for long-term disability benefits that can cover you for as long as five years from an approved incident. 

Pros and Cons of Short-Term Disability Insurance

As with all types of insurance plans, there are both pros and cons of short-term disability insurance.

First, the pros of SDI:

  • Covers employees who are injured or sickened outside of work
  • Pays a portion of employee’s income
  • Can be purchased outside of work by employees who are not covered by employer plans

Now, the cons of SDI:

  • Does not cover​ injuries or illnesses suffered at work
  • Does not pay entire income of employee
  • Expires after a set amount of time as defined by the plan
  • Not provided through Social Security by the Federal Government
  • Does not take effect until sick time has been used by employee

Pros and Cons of Temporary Disability Insurance

Let's take a look at some of the pros and cons of temporary disability insurance. 

The pros:

  • Plans offered by employers
  • Insurance covers injuries and illnesses not suffered at work
  • Pays a portion of salary, typically 60 percent
  • Payments are made for a period of three to six months
  • Can take effect prior to activation of SDI policy benefits

The cons:

  • Plans do not last length of illness or injury for some people
  • Policy does not cover anything suffered at work
  • Does not pay 100 percent of salary
  • Will expire, leading employee to apply for long-term disability benefits

As you can see, there are some major differences between short-term disability insurance and temporary disability insurance plans. Whether you are covered under these plans all depends on what your employer offers. If SDI is not offered by your employer, you could always purchase coverage yourself to provide peace of mind.