After years of dreaming about onesies and pacifiers, you’ve decided it’s time to take the leap and start a family. As you plan a color scheme for the nursery and look through Pinterest boards of first year pictures, you’re also likely going to think about how you will make ends meet during maternity leave.
Only 15 percent of U.S. workers in 2017 had access to paid family leave benefits (up from 11 percent in 2010), according to the Bureau of Labor Statistics. Though Federal law requires most employers to give workers 12 weeks of unpaid leave and a guarantee of employment upon return, it doesn’t help with diapers and keeping the lights on in the meantime.
If you don’t have a paid family leave benefit through work, short-term disability insurance may step in and pick up the slack while you recover and bond with baby. Here’s what you need to know about using short-term disability insurance during maternity leave.
CHECK YOUR EMPLOYER PLAN
There are two main types of disability insurance: long- and short-term policies. If a sickness or injury prevents you from working, long-term disability will replace a portion of your income for many years or all the way to retirement (depending on the policy terms). Short-term disability insurance, as you may have guessed, covers lost income for weeks or up to two years — a temporary injury or sickness. Short-term disability is what you’ll lean on during a part of your maternity leave.
Many employers offer both short- and long-term disability coverage as part of a benefits package. So, as a first step, pull out your work benefits folder to see what, if any, kind of short-term disability coverage you have through work. There are several pieces of information you’ll want to gather about the policy:
- Elimination Period: This is how long you need to be out of work before your benefits begin. Some policies pay immediately while others don’t pay until you are out of work for a certain number of days. You may need to use vacation or sick days if you have a long elimination period.
- Benefit Period: This is how long you can claim payments while you are unable to work.
- Benefit Amount: This is how much you’ll receive, based on a percentage of your income (some policies may cover nearly 100 percent of your income, but most cover only a percentage).
Short-term disability policies pay a weekly benefit when you are disabled following the elimination period. You may wish to take three months off work to bond with the baby, but the short-term disability insurance policy will only pay benefits if you are disabled due to the pregnancy. The typical timeframe you are considered disabled following delivery of the baby, without complications, is six weeks; eight weeks if a C-section was performed. Benefits may be paid prior to delivery of the child if your doctor has put you on bedrest due to the pregnancy.
Ask yourself a few questions as you review the policy. Does the benefit period match the amount of time you plan to take off? Is the benefit amount enough for you and your family? Is the elimination period too long? The devil is in the details.
DO YOU NEED MORE?
In most cases, you’ll roll with your employer’s short-term disability plan during maternity leave.
But if your employer’s coverage doesn’t meet all your needs, or you are self-employed, you can purchase a supplemental short-term disability policy to fill in any gaps. The premium cost will vary based on your age, health and job field. You’ll also pay more for a shorter elimination period, longer benefit period or higher benefit amount — the sweeter the benefits, the more you’ll pay.
If you plan to purchase a short-term disability policy, make sure you do it before you start trying to get pregnant. If you apply for a policy while pregnant, you won’t be disqualified; however, your pregnancy will be considered a preexisting condition. As a result, your purchase won’t cover your current pregnancy or any associated complications.
YOUR FAMILY, YOUR TERMS
Starting a family is one of the most rewarding things a person can do in their lifetime — money shouldn’t get in the way of that. If you’re thinking about starting a family, it’s a really good time to speak with a financial professional who can help run through a pre-baby financial checklist. With the right planning, you can build assurances that your bundle of joy with fit right in with the long-term financial goals for you and your (growing) family.