Short-Term Disability Insurance: Employer Plan vs. Buying Your Own

Short-term disability insurance replaces part of your paycheck if you’re temporarily unable to work — recovering from surgery, a non-work injury, or childbirth. Whether you get it through an employer, buy it yourself, or go without depends heavily on which state you live in and what your employer actually offers.

What It Covers

Short-term disability typically replaces 40% to 70% of your salary for a period lasting a few weeks up to about six months, most commonly 3 to 6 months, after a waiting period (called an elimination period) of roughly 7 to 14 days. Unlike workers’ compensation, it covers conditions unrelated to your job — that’s the key distinction between the two.

Employer Group Coverage

Only about 40% of private-sector workers have access to employer-provided short-term disability, meaning most workers don’t have it as a benefit at all. Where it exists, group rates are far cheaper than an individual policy because the risk is spread across the entire employee pool, and it’s often subsidized partly or fully by the employer. Five states — California, Hawaii, New Jersey, New York, and Rhode Island — plus Puerto Rico mandate some form of short-term disability coverage; everywhere else, it’s a voluntary benefit an employer chooses whether to offer.

Buying an Individual Policy

Individual short-term disability policies for the self-employed typically cost 1% to 3% of your annual income, while group coverage through an employer commonly prices out to roughly $0.25 to $0.70 per $100 of covered salary per month. An individual policy is portable — it stays with you if you change jobs or go self-employed — which a group plan never does.

Which One to Actually Get

If you have access to an employer group plan, it’s almost always the cheaper first layer of coverage; the question is whether the replacement percentage and duration are enough for your actual expenses. If you’re self-employed or your employer offers nothing, an individual policy fills a real gap — it’s a different problem than long-term disability coverage for 1099 workers, which protects against a permanent or extended inability to work rather than a short recovery period.

Written by Samuel, Certified Public Accountant

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