If you were to become sick or disabled tomorrow and were unable to work for two or three months, would you have enough savings to cover your living expenses during that time? If you don't, short term disability insurance would be an invaluable resource as you recover so you can get back to work.

According to the American Council of Life Insurers, nearly one-third of all Americans will suffer a serious disability between the ages of 35 and 65. Statistics like that make should make short-term disability insurance a vital piece of your overall financial plan.

What is STD?

Short term disability (STD) pays a percentage of your salary if you become temporarily disabled, meaning that you are not able to work for a short period of time due to sickness or injury (excluding on-the-job injuries, which are covered by workers compensation insurance). A typical STD policy provides you with a weekly portion of your salary, usually 50, 60, or 66 2/3 percent for 13 to 26 weeks. Most STD policies have a "cap," meaning you receive a maximum benefit amount per month.

The average premium in 2006 for a group STD policy was $204, according to a survey by John Hewitt & Associates, a disability research company based in Portland, Maine. STD insurance, which is most often purchased as part of a group at work, can be paid by either the employer or the employee. Group STD policies are "guaranteed issue," meaning you do not have to take a medical exam to buy coverage.

You generally start receiving money from your STD policy within one to 14 days after becoming sick or disabled. The actual time for coverage to kick in depends on whether you suffer an illness or injury. If you suffer an injury, your benefits will be paid immediately. If you suffer an illness, it will take longer because there needs to be enough time to show that the illness is grave enough to be disabling.

For example, if you severely injure yourself by falling off a ladder at your house, your benefits would kick in immediately. However, if you suffer from a serious illness and can't go to work, your insurance may not kick in until eight days after you became ill. Also, your employer may have additional restrictions as to when your STD policy kicks in. For example, your employer may require you to use all of your sick days before you begin receiving payments from your STD policy.

You also may receive retroactive benefits if you have a condition that worsens over time. For example, let's say you have a cold and you took three sick days at work. If your cold evolves into pneumonia and you need to be hospitalized for three weeks, you would receive disability pay retroactive to your first sick day.

Who should buy short term disability?

Individual STD policies are available only on a limited basis. Some insurers sell "accident policies" that will pay you money each month for a year if you are injured in an accident.

If you have enough in savings to last until you go to work again, you probably don't need to buy STD or an individual accident policy. However, if you do not have much in savings or any other income to fall back on if you were to become disabled, an individual STD policy is a wise option.

Top 10 short term disability insurance companies, ranked by earned premium
Insurance company	2006 sales (in millions)
1. Hartford Life	$92.3
2. Unum	$66.7
3. Lincoln Financial Group	$53.5
4. Standard Insurance Co.	$42.1
5. Guardian Life	$37.2
6. CIGNA	$35.0
7. Reliance Standard	$33.6
8. Principal Financial Group	$30.0
9. MetLife	$27.06
10. Prudential	$25.8
Source: John Hewitt & Associates