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 of each type of insurance.
What Is Short-Term Disability Insurance – SDI?
There are quite a few companies that provide their employees with this type of insurance as part of their employee benefits package. There are also some people who purchase this insurance on their own, separate from their employment if not offered by their employers.
The federal government does not provide workers with any SDI benefits through Social Security. Because of federal laws, employers are required to provide employees with some form of unpaid leave (such as a workers' compensation leave or the Family and Medical Leave Act (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.
As with all types of insurance plans, short-term disability has its pros and cons.
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
Cons of SDI:
- Does not cover injuries or illnesses suffered at work
- Does not pay the entire income of the 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 the employee has used sick time
What Is Temporary Disability Insurance – TDI?
Some states require that employers offer temporary disability insurance to their employees. This type of insurance provides coverage to 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, you might be eligible for long-term disability benefits that can cover you for up to five years from an approved incident.
Let's take a look at some of the pros and cons of temporary disability insurance.
Pros of TDI:
- Plans offered by employers
- The 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
Cons of TDI:
- Plans do not last the length of illness or injury for some people
- The 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 notable 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 your employer does not offer SDI, you could always purchase coverage yourself to provide peace of mind.