Whenever a catastrophic event or illness occurs, it is time to take a look at your business insurance policies. As a business owner, you may provide short-term disability to your employees, who may receive compensation if they are diagnosed with COVID-19 and cannot work. Some business owners may have additional insurance that compensates the owner and pays for other business expenses the owner cannot pay due to COVID-19.
Short-term disability is a type of insurance that provides compensation if you are unable to work due to an injury or illness. It is different from workers' compensation insurance, which provides coverage if you are injured on the job. By contrast, disability insurance covers you when you are hurt or become ill outside of work.
As the name implies, short-term disability only provides compensation for a limited amount of time, typically less than a year. It likely will not provide the same amount of money you received while working but may be limited to 60-80% of your income, depending on your policy. There may also be a cap on the maximum amount you could receive, regardless of your income.
If your business has employees, your business may pay into a short-term disability program that would provide coverage for your employees. This is optional in most states, but mandatory in California, Hawaii, New Jersey, New York, and Rhode Island.
As a business owner, you have the option to pay into a program to protect yourself, but typically this is not a legal requirement and it is not as common. Like any other type of insurance, you must have had the policy in place before the event occurred which led to your disability or illness.
In response to the COVID-19 outbreak, many states and insurance providers have announced changes to their short-term disability rules. One major change is that many policies are now waiving the waiting period, which used to be a week or longer before the individual could apply for benefits.
Many policies now specifically state that you are eligible to receive benefits if you have been exposed to the Coronavirus, or if you have been quarantined due to the illness and are unable to work as a result. However, you must show that you actually have a disability. If your inability to work is due to a government mandate to close down your business or socially isolate, this type of insurance does not apply. You must show that you are actually ill, and this illness is the reason you cannot work.
If you are able to work from home and are well enough to do so, you likely would not qualify for disability. However, you may be eligible if your income is reduced significantly. The particular policy will specify what reduction in income is required, such as 60-80% of your prior income. If less than that, like if your work was only reduced by 50%, you may not be eligible for short-term disability.
The process for applying for coverage will depend on your particular policy. Contact your insurance company or your state's disability insurance department if you paid into a state program. To qualify, most insurance providers require you to provide documentation, both of your medical status and your reduced income.
In this environment, it may be challenging to obtain medical verification, as hospitals and doctors are at capacity. You may have the option to seek virtual services from a teledoctor to confirm your illness. The doctor may not be able to verify that you have COVID-19, but can examine your condition and determine if you are able to work or if you should be quarantined.
As a business owner, it is more challenging to prove a reduction in income than an employee who receives a paycheck. Be prepared with financial records, showing your profits before and after the illness, and check with your insurance adjuster to see what is required.
In addition or in lieu of short-term disability insurance, you may have Disability Overhead Insurance. This provides compensation if you, as the business owner, are disabled. However, it is more limited in paying for the overhead for your business, including rent, utilities, taxes, supplies, and payroll. Like short-term disability, your policy likely requires you to provide verification from a medical professional of your diagnosis, and a showing that the illness prevents you from working.
There are a number of limitations to this type of insurance. It does not provide the owner with any salary or profits but is limited to keeping the business afloat. In addition, it is limited to what expenses you had before the disability. In other words, you can not use this as an opportunity to bring on additional employees or move into a larger office. Finally, your policy likely has a maximum amount it will pay on a monthly basis and may end after a specified amount of time.