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Short-term Disability Insurance on Maternity Leave

Aparna Iyer Oct 3, 2018
The following write-up deals with the need for short-term disability insurance on maternity leave and discusses the details of a standard policy.
Short-term disability insurance ensures a continued flow of income, in case people are unable to work on account of occupational and non-occupational injuries.
Since job related injuries are covered by workers' compensation allowance, this insurance comes in handy when people fall sick, get injured, or when women are unable to work due to pregnancy or pregnancy-related complications. According to many surveys, women constitute a large percentage of its claimants.

Understanding Its Applicability on Maternity Leave

Provisional Benefits

According to the Family and Medical Leave Act, working women are entitled to 12 weeks of unpaid leave to care for a newborn or adopted child, with the guarantee of the same job when they return, only if have been employed for at least 12 months in the same firm before their leave and have worked for a minimum of 1,250 hours during the same period.
In the US, the following five states, namely Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico require the employer to provide short-term disability benefits.
Employers in California pay up to 60 - 70% of the employee's gross salary in lieu for a period of 52 weeks. In New York, they are expected to pay up to 50% of the employee's salary for 26 weeks while in New Jersey, claimants are entitled to 26 weeks of benefits to the tune of 66.66% of their salary.
Employers in Hawaii pay up to 58% of the employee's salary for 26 weeks, and claimants from Rhode Island are eligible to receive benefits based on a percentage of their quarterly earnings over the base period.
Women who are residing in the remaining states may have the benefit of the same. This is highly advantageous to the employees since the employer pays premiums on the policy. In case the employer does not provide insurance, women will have to purchase one individually and pay premiums on the policy.
The premium will vary depending on the risk factors. The standard coverage is about 65% of the usual pay for up to 6 weeks for a regular birth and 8 weeks for C-section (Cesarean section). Women can elect benefit periods of 3, 6, 12, and 24 months. The longer the benefit period, the higher the premium.

Are the Benefits Taxable?

A number of employers offer disability insurance as part of their employee benefits program. In the absence of the same, women may be forced to purchase one. Short-term disability benefits are not taxed if the insured has funded the premium for the policy. On the other hand, if the employer pays the premium, the amount of these benefits is taxable.

Waiting Period and Elimination Period

These plans have a waiting period of around 14 days and typically, women exhaust their paid leave before the plan kicks in. The elimination period for this insurance is around 10 months.
Maternity leave along with short-term disability insurance covers illness or injury at no additional cost. Women don't have to pay any extra premium for pregnancy, delivery or any complications like premature birth. As many employers do not offer maternity benefits, women should consider this insurance option, even if it means funding the plan on their own.