Does Short-Term Disability Insurance Cover Maternity Leave?

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, there’s a lot you’ll want to start thinking about financially, too.

Before long, you’ll probably start thinking about how you’ll cover the cost of having a baby. You’ll also need to account for your maternity leave and how you’ll make ends meet during that time away from work.

Some employers now offer paid leave options. But if your employer doesn’t offer them, you may be able to use your employer’s short-term disability insurance to cover maternity leave.

Here we’ll explain how short-term disability insurance can help cover maternity leave to help you prepare for maternity leave.

Short-term disability and pregnancy 

Only 27 percent of U.S. workers in 2023 had access to paid family leave benefits, according to the Bureau of Labor Statistics. Only some states require employers to offer paid family leave for pregnancy and childbirth. Though federal law requires most employers to give workers 12 weeks of unpaid leave and a guarantee of employment upon return, not everyone can afford to take three months of unpaid leave. 

Whether or not you have a paid family leave benefit, short-term disability insurance may increase the money available while you recover and bond with your baby. While you usually can’t collect disability and paid family leave at the same time, some employees may use disability benefits to recover from the birth. 

Short- vs. long-term disability for maternity leave 

There are two main types of disability insurance policies: long-term policies 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 a shorter period: weeks or up to two years—a temporary injury or sickness. You may be able to lean on short-term disability during your maternity leave. 

Short-term disability vs. FMLA for maternity leave

People sometimes confuse short-term disability insurance with a federal law passed in 1993 called the Family and Medical Leave Act (FMLA). The act requires an employer to give you leave and hold your job for 12 weeks to manage a serious health condition (including childbirth) or care for a loved one with a serious health condition. Your employer isn’t required to pay you, and that’s where short-term disability can help out. If your employer doesn't offer paid family leave, you can use short-term disability insurance to get paid while on FMLA. By combining these benefits, you could protect both your job and some of your income.

If you’re planning to adopt, FMLA can provide you with up to 12 weeks of unpaid leave. But disability insurance doesn’t provide benefits for adoption because it isn’t considered a medical condition that prevents you from working.

Short-term disability for maternity for people who are self-employed 

If you’re self-employed, you can still purchase disability insurance to protect your income and business in case of injury or illness—including maternity leave. You might get individual disability insurance to cover yourself and/or group disability insurance as a benefit to you and your employees. Your Northwestern Mutual financial advisor can help find the appropriate coverage. Recommendations will be based on the needs, goals and budget of you and your business.

What part of pregnancy and maternity leave is covered by disability insurance? 

If your policy covers your pregnancy and maternity leave, the terms of the policy will spell out what is covered for an uncomplicated pregnancy. But generally, short-term disability policies pay a weekly benefit when you’re unable to work for a short period of time.

You may wish to take three months off work to bond with the baby, but the short-term disability insurance policy will pay benefits only if you are disabled due to the pregnancy. The typical time frame you are considered disabled following delivery of the baby, without complications, is six weeks (eight weeks if you had a C-section). If you have health issues and your doctor documents the need for a longer coverage period, you may be eligible for additional coverage. 

How much money can you expect from disability insurance for pregnancy?

Short-term disability insurance typically covers only a portion of your lost income, so you’ll likely have to do some financial planning to account for the rest. The amount you’re paid can vary greatly by policy, but generally, short-term disability insurance policies will cover somewhere between 50 percent and 75 percent of your income. You likely won’t be taxed on this money unless your employer contributed to premiums—then they’d be subject to income tax.

How you’ll cover the extra 50 to 25 percent of your income will largely depend on your situation. If you’re not sure how you’ll account for your temporarily decreased income, your Northwestern Mutual financial advisor can help. Now is also a really good time to talk to a financial advisor, because having a baby will likely bring some financial milestones that need focus—like saving for college, increasing your life insurance coverage or paying for a wedding. Your Northwestern Mutual financial advisor can create a plan that helps you balance all of these goals.

How to use short-term disability for pregnancy

Short-term disability policies are typically offered through an employer, but you also may be able to find a policy on your own. If you’re looking to add short-term disability insurance, here’s how to do it:

Determine whether you have employer coverage 

Many employers offer both short- and long-term disability coverage as part of a benefit 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 (sometimes called “waiting period” or “qualifying period”): This is how long you need to be out of work before your benefits kick in. Some policies pay immediately, while others don’t pay until you’re out of work for a certain number of days. You could use vacation or sick days to cover some income if you have a long elimination period. 
• Benefit period: This is how long you can claim payments while you’re 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 50–75 percent). 

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? These details are important to understand where you might have a gap. Your Northwestern Mutual financial advisor can review your policy and help you understand it.

Apply for short-term disability insurance

If you’re not currently enrolled in your employer’s plan, you’ll need to sign up. It can be smart to sign up for short-term disability at least a year before you start trying to get pregnant. Some policies require that you don’t have a preexisting condition (like a pregnancy) to be approved for the policy, whereas others may require that you’re on the policy for a certain period of time before accessing the benefit. The terms will depend on the specific policy you carry, so it’s a good idea to get ahead of this information as soon as possible.

When it comes time to apply, you’ll submit forms to your employer. Then you’ll begin contributing to your policy, likely via paycheck deduction.

Submit a claim

Once you’re ready to access the benefit, you’ll submit a claim. You’ll likely need some medical documentation from your doctor about your condition—like your due date, restrictions you’ll have and the expected length of your disability. It can take an insurance company several weeks to review your claim, so you’ll want to make sure you give yourself enough time to submit the claim before you’re hoping to collect the benefit.

Pregnancy and maternity leave on 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 check in with your Northwestern Mutual financial advisor, who can help run through a pre-baby financial checklist. A financial advisor can also help you think about other important financial considerations that come with adding to your family—some that you may have thought of and others you might not have considered.

Your Northwestern Mutual financial advisor will take time to get to know you and can help you design a big-picture plan based on your financial goals. These can include welcoming a new baby, planning ahead for retirement and paying for college or a wedding. Your advisor is also a great resource to connect you with other professionals who can help with important to-dos when you have a baby, like creating an estate plan and selecting a guardian. You’ll soon have your hands (and hearts) full, so talk with your advisor now to get your plan in place. That way, you can have more time to enjoy your bundle of joy.
  
Disability insurance policies contain some features and benefits that may not be available in all states. The ability to perform the substantial and material duties of your occupation is only one of the factors that determine eligibility for disability benefits. These policies also contain exclusions, limitations and reduction-of-benefits provisions. Eligibility for disability income insurance, additional policy benefits, and qualification for benefits, is determined on a case-by-case basis. For costs and complete details of coverage, contact your Northwestern Mutual Financial Representative.