State mandated short-term disability insurance programs often lull families into a sense of false security. Only five states have laws requiring the coverage, and many people mistakenly assume their state is one of the five. They are wrong 45 times out of 50.

Even when they assume correctly (they work in a state with a mandated program), they find that the program has holes. They limit the monthly benefit amounts, and payments sometimes expire before people can return to work.

These issues come up frequently for families during maternity leave.

  • Which ones have mandates?
  • What are the limitations?
  • What are the alternatives?

States Mandating Short-Term Disability

State mandated short-term disability insurance exists in five states. Forty-five states do not require the coverage for temporary medical conditions. If you are temporarily sick, hurt, or pregnant you may have very few options for government assistance.

Applying for Benefits

You must work in a state that has mandated coverage; otherwise, you cannot apply for benefits or file a claim. The programs do not automatically apply to every resident. Keep in mind that these programs apply based upon where you work, not where you live. If you commute across a border, you may not be covered.

Apply for a short-term loan if you work in one of the 45 states without a program, or you did not purchase a private policy prior to having a need. Repay the note with convenient monthly payments.

The five states with mandated temporary disability programs are:

  1. California
  2. Hawaii
  3. New Jersey
  4. New York
  5. Rhode Island

Government employees are often not included. If you work for the federal, state, county, or municipal government, you may not have coverage. Teachers are often government employees. People working in cash businesses may see lower levels of income replacement – because they may report lower income.

Limited Amounts and Length

People subject to the state temporary disability mandates are grateful when they are physically unable to work. However, the benefit amounts may be limited in multiple ways.

  1. States limit the monthly benefit amount by percentage, which ranges from 50% to 66%. At the minimum, these levels burden workers with at least a 1/3 cut in take-home pay.
  2. A hard dollar cap always limits the monthly benefit amount. The amount of the hard dollar cap may increase each year, or stay the same for decades. Hard dollar caps limiting the monthly benefit amount start at $170 per week in New York. That amount is a mere pittance.
  3. The monthly benefits amounts are also limited by the duration. Many people ask, “How long does state short term disability last?” It lasts for 6 months, except in California where it lasts for 12 months.
  4. Claims payments are often taxable. Each varies how the premiums are paid. Taxed claims payments lower the amount of spendable income replacement received.

State Short-Term Disability Alternatives

One of the most frequently searched terms online is, “Does blank offer state short-term disability benefits?” Fill in the blank with any of the 45 other answers. The answer is always no. Fortunately, there are alternatives.

Individual Coverage

Almost anyone can purchase individual short-term disability. Even those with mandates provide residents the opportunity to purchase policies to increase the benefit amount or extend the payment duration.

Individual short-term disability insurance is regulated at the state level. Each insurance commission must approve the policy features, language, and qualifying conditions. As a result, there may be minor differences in how the policies operate depending upon where you work.

Maternity Leave

The people most often asking whether there is state mandated short-term disability where they live are those needing the benefits. Growing families ask this question the most during maternity leave. They might fare much better if they asked the question while investigating the average cost of IVF. Coverage must begin prior to conception.

Only three states mandate paid parental leave as an extension of their disability programs. Private policies provide a viable alternative. Most employers do not provide paid maternity leave.

Policies covering normal childbirth are only available as an employee benefits program. Only policies covering normal childbirth apply during most maternity leave situations. Employers are not required to offer the policies, but many employers elect to offer a voluntary option.

State-based health insurance exchanges for maternity care allow individuals to upgrade their plans after conception. While the plans do no replace income during maternity leave, they can reduce the out-of-pocket costs of the hospital labor and delivery charges.

Unemployment Compensation

Part of the American Recovery and Reinvestment Act of 2009 provided incentives to expand unemployment compensation laws to include income replacement for a compelling family reason. In some states, a spouse may be eligible for payments, while in others a worker’s own disability qualifies them for benefits.

Five accepting federal government incentives chose to include a worker’s own disability as a compelling family reason. While not a traditional temporary disability plan, the government benefit may work the same way when workers lose their jobs.

Those supporting this definition include Arkansas, Illinois, Maine, Minnesota, Texas, and Washington.

On the Job Accidents

All 50 mandate temporary disability income replacement for on-the-job accidents and injuries. Workers compensation covers on-the-job conditions. Each state program replaces a portion of income and may make payments for medical care to help you return to work more quickly.

Permanent Disabilities

All 50 administer Social Security Disability Insurance in partnership with the federal government. The program does not cover temporary medical conditions. Contact your local office to apply for benefits. You must expect your medical condition to last for 12 months or longer, or result in death.

State mandated short-term disability insurance is rare, but not the only option. Act at the right time to buy a private policy.