Wonky Word Wednesdays: Temporary Disability Insurance

You’ve seen the AFLAC commercials right? Lately, it is the woman in yoga class talking about how the duck helped pay her mortgage while she was injured and out of work? Well, the benefits she received are through a program called temporary disability insurance, (through a private company in this case), which bring us to today’s wonky word, Temporary Disability Insurance (TDI).

A temporary disability insurance program is an insurance fund set up (either by the state or through an employer) to provide benefit payments to workers who pay into the insurance pool. Workers who are unable to work because of a non-work related illness, injury or pregnancy, are provided benefits in the form of wage replacement. Like any type of insurance, TDI spreads out the risk and provides employees the peace of mind that in the event that they must take time off work (something that could happen to any of us, at any time), they will have a stream of income. For businesses that provide TDI, it can be a powerful recruitment tool. While large businesses often provide TDI as private options, five states including, California, Hawaii, New Jersey, New York, and Rhode Island, have also enacted statewide TDI programs. In 2011, approximately 4.6% of the American population between the ages of 16 and 64 received some form of disability insurance.

TDI does have its limitations. Unlike the Family Medical and Leave Act (FMLA), it doesn’t provide job-protection. Since TDI only applies if you are injured, ill, or pregnant, program benefits don’t cover individuals that need to take time off work to care for a sick child, elderly parent, or bond with a newly adopted child. (An upcoming blog will detail how some states have expanded their TDI programs to also provide paid family leave)

States finance TDI programs through a combination of employer and/or employee payroll contributions that are directed into a state fund that is used to cover the cost of processing claims and administering benefits. Typically, eligible workers in the five states can receive anywhere between 26 and 52 weeks worth of benefits. In states, like California and Rhode Island, TDI benefits vary, and are set at a percentage of weekly salary or wages up to a maximum benefit. Benefit amounts in the five states include the following:

California – 55% of weekly salary. Maximum benefit is $1,104/week and the average weekly benefit in 2014 was $488.

Hawaii – 58% of employee’s average weekly salary. Maximum benefit is %52/week.

New Jersey – 66% of average of of last 8 week’s of pay. Maximum benefit is $604/week and the average weekly benefit in 2012 was $426.

New York – 50% of an employee’s last 8 weeks average gross wages. Maximum benefit is $170/week

Rhode Island – 4.5% of highest quarterly wages in the last year, which is roughly 60% of an employee’s weekly salary. Maximum benefit is set at $770/week and the average benefit paid in 2014 was $447.

As you can see, workers do not receive 100% of their wages while away from work but receiving at least some portion enables them to remain financially secure until they get on their feet again and back to work. Keep following our blog to learn more about how temporary disability insurance relates to existing paid family leave programs.

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