According to the State of California’s Employment Development Department (EDD), the California State Disability Insurance (SDI) program provides California residents “short-term disability insurance (DI),” for which you may be eligible “if you are unable to work due to non-related illness or injury, pregnancy or childbirth.”
That’s a lengthy definition, but it leaves a lot of essential, unanswered questions:
- Who is eligible to receive benefits?
- How much in benefits can you receive?
- How long do benefit payments last?
- When do benefits begin paying out?
- What happens if your benefits run out?
In this article, we’ll answer these questions to help you understand your SDI benefits and how to survive financially when those checks stop coming, and you’re still disabled and unable to return to work. More importantly, we'll also cover a better option for your disability insurance coverage needs.
The first question most people ask is, “How much will I get?” but perhaps a better first question is “How do I know if I’m eligible?” So, let’s answer this first, and then we can look at how much you can receive in benefits.
According to EDD, to be eligible for DI benefits, you must:
- Be unable to do your regular or customary work for at least eight days.
- Have lost wages because of your disability.
- Be employed or actively looking for work at the time your disability begins.
- Have earned at least $300 from which State Disability Insurance (SDI) deductions were withheld during your base period (more on that later).
- Be under the care and treatment of a licensed physician/practitioner or accredited religious practitioner within the first eight days of your disability. The date your claim begins can be adjusted if it does not meet this requirement. However, you must remain under care and treatment to continue receiving benefits.
- Complete and submit your Claim for Disability Insurance (DI) Benefits (DE 2501) no earlier than nine days after your first day of disability begins but no later than 49 days, or you may lose benefits.
Have your physician/practitioner complete the medical certification portion of your disability claim.
- A nurse practitioner may certify a disability within their scope of practice.
- A licensed midwife, nurse-midwife, or nurse practitioner may complete the medical certification for disabilities related to normal pregnancy or childbirth.
Now that you’re confident that you’re eligible and your claim will be approved, your most pressing question can be answered.
Your weekly benefit amount is calculated using a base period consisting of 12 months. SDI then takes that 12-month base period and divides it into four quarters. The quarter when you earned the most money is the quarter they use to decide your benefit amount.
You must have earned at least $300 in your base period, and you must have paid SDI taxes on those earnings (usually noted as CASDI on your paystub). Your base period does not include wages paid at the time your disability begins.
Your weekly benefit amount is about 60 to 70 percent (depending on income) of wages earned, up to the maximum weekly benefit amount. The minimum benefit amount is $50 per week up to a maximum of $1,357 per week.
California SDI is short-term disability insurance, not meant to protect your income for more than 52 weeks.
Your benefit period usually ends on the date your medical provider listed on the claim form indicated you should be able to return to work. However, when that date arrives, and if you’re still unable to return to work, you and your medical provider can complete a form asking that the benefit period be extended (up to the 52-week maximum).
You typically receive your first benefit payment within two weeks of filing your claim; you’ll get paid every two weeks after that until your benefit period is over. You can receive payment through a debit card, direct deposit into your bank account, or in the form of a check.
When you get your first check, you’ll notice that you didn’t get paid during the first seven days of your disability. Those first seven days are a “non-payable waiting period,” meaning you’re going to miss a week’s paycheck at the beginning of your disability.
When your 52 week benefit period has expired, SDI insurance will stop paying you altogether. If you’re still suffering from your disability and can’t perform the job duties that you were doing at the time of your disability, you have several options to provide you with the income you need:
- Live off of savings
- Have friends/relatives help you financially
- Borrow money
- Invade your retirement account
- Receive long-term disability insurance payments
For most people, the first four options aren’t viable. Their savings won’t last them for more than 30 days, friends and family have their own financial obligations and don’t have money left over to give or loan to you, bank’s won’t lend you money because you’re not working, and if you have a retirement account and withdraw money from it, you’re jeopardizing your long-term financial security.
Long-term disability insurance is your best option.
Long-term disability insurance (LTD) is the protection your purchase from an insurance company before you become disabled. The insurance company, like SDI, will typically replace 60% to 70% of your income.
LTD is very affordable and can be structured around your SDI program to reduce your cost and provide you with maximum financial protection. Like SDI, long-term disability insurance has a waiting period. The longer the waiting period, the greater the price reduction there is on your LTD coverage. By having your LTD waiting period be 52 weeks, you won’t miss a paycheck when your SDI insurance runs out, and you’ll be buying your LTD at a lower price than someone buying it with a shorter waiting period, like 90 days.
The other variable that affects the cost (besides the amount of monthly benefit you receive) is the length of time you’ll receive your LTD benefit. You can also tailor that to meet your needs and fit your budget. You’ll generally find benefit periods can last two years, five years, or up until you retire—the price of coverage increases as the length of your benefit period increases.
If you don’t have long-term disability insurance to protect yourself and your family from losing your income, the time to get LTD is now. You have to qualify medically to be issued a policy, so you want to apply while you’re healthy. Also, the cost of LTD increases every year you get older, so buying it now will lock in your price at a lower rate than if you wait.
Talk with an insurance agent that specializes in disability insurance to learn more about LTD, or find the information you need online and complete an application without meeting with an insurance agent. It will cost a very small percentage of your income for protection that is a “must-have” for anyone concerned about their financial future.
Having grown up in upstate New York, Bob Phillips spent over 15 years in the financial services world and has been making freelance writing contributions to blogs and websites since 2007. He resides in North Texas with his wife and Doberman puppy.
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