Maryland short-term disability laws do not require employers to provide short-term disability insurance, and Maryland is not one of the states that runs its own temporary disability program. Income replacement when you can’t work because of a non-work injury or illness comes from an employer-sponsored plan, a private policy you buy yourself, or, starting in 2028, the state’s new Family and Medical Leave Insurance program. Job protection during that time comes from a separate set of federal and state laws.
The New State Program (FAMLI) and Why It Doesn’t Help Yet
Maryland’s Family and Medical Leave Insurance program, created by the Time to Care Act, is the biggest change on the horizon. Payroll contributions started October 1, 2024 at 0.90% of covered wages, split evenly between employer and employee at 0.45% each. Employers with 14 or fewer workers are exempt from the employer share, but their employees still pay the 0.45%. That rate holds through at least June 30, 2026.1Maryland Department of Labor. Maryland Department of Labor Announces Contribution Rate for FAMLI
Benefits don’t begin until January 2028. Once they do, eligible employees can draw up to 12 weeks of paid, job-protected leave per 12-month period, capped at $1,000 per week and calculated on a sliding scale up to 90% of the average weekly wage.2Maryland FAMLI. Maryland FAMLI – Paid Family and Medical Leave Is Coming to Maryland Qualifying reasons include your own serious health condition, caring for a family member with a serious health condition, welcoming a new child, and matters tied to a family member’s military deployment. Someone who experiences their own serious health condition and welcomes a new child in the same year can receive up to 24 weeks total.3Maryland FAMLI. FAMLI Frequently Asked Questions October 2025
Eligibility will require at least 680 hours in a Maryland-based position during the four calendar quarters before you apply or your leave begins, whichever comes first.4Maryland FAMLI. FAMLI General Questions October 2025 There will be no elimination period; benefits are available on the first day of leave, and the first payment lands within five business days of claim approval.5Maryland FAMLI. FAMLI Claims Questions October 2025 Self-employed workers will be able to opt in later, with more details expected in 2028.
Right now, contributions are coming out of your paycheck, but no benefits are payable. If you need short-term income replacement today, you have to look elsewhere.
Employer-Sponsored Short-Term Disability
Many Maryland employers offer short-term disability insurance as part of a benefits package, though participation is often voluntary and there is no state-level standardization. Plans typically replace 50% to 70% of income for a period ranging from a few weeks up to six months. Premiums may be paid entirely by the employer or split with employees through payroll deductions.
Eligibility usually depends on tenure. It is common to require 30 to 90 days of continuous employment before a claim can be filed. Most policies also impose an elimination period, meaning a gap between when the disability begins and when payments start. A 14-day gap is common, though some plans use 7 or 30 days. Your employer may let you use accrued sick leave to bridge that gap.
Plan terms vary widely. Some policies cover only conditions unrelated to work, because workplace injuries are handled through workers’ compensation. Others exclude pre-existing conditions, meaning a disability tied to something diagnosed or treated before your coverage started won’t qualify.
If your employer provides the plan, it almost certainly falls under the federal Employee Retirement Income Security Act (ERISA), which governs how employer-sponsored benefit plans are administered.6U.S. Department of Labor. ERISA ERISA requires fair claim processing, written explanations for denials, and a formal appeal right. That distinction matters heavily if a claim gets denied, as explained further below.
Private Short-Term Disability Policies
If your employer doesn’t offer short-term disability, you can buy a policy directly. Private policies generally replace 50% to 70% of income, with premiums driven by age, health, occupation, and coverage level. Individual policies typically run $25 to $150 per month for a plan replacing roughly 60% of income.
Underwriting is usually stricter than with employer group plans. Insurers may require a medical exam or detailed health questionnaire, and most policies exclude pre-existing conditions for a set period after coverage begins, often six to twelve months.7Life Happens. Four Facts About Getting Disability Insurance with a Pre-Existing Condition
Individual policies are not governed by ERISA. Instead, they fall under Maryland’s insurance laws, including the rules against unfair claim settlement practices.8Maryland General Assembly. Maryland Insurance Code 27-303 – Unfair Claim Settlement Practices If an insurer unreasonably delays or denies a valid claim, you can file a complaint with the Maryland Insurance Administration.9Maryland Insurance Administration. File a Complaint The remedies you have if a claim goes wrong depend on which framework applies.
Job Protection While You’re Out
Short-term disability insurance replaces some of your income. It does not, on its own, guarantee you’ll have a job to return to. Federal and state leave laws fill that gap.
Family and Medical Leave Act
The federal FMLA provides up to 12 weeks of unpaid, job-protected leave per year for a serious health condition that keeps you from performing your job. To qualify, you must work for an employer with at least 50 employees within 75 miles, have been employed for at least 12 months, and have logged at least 1,250 hours in the year before your leave.10U.S. Department of Labor. Family and Medical Leave Act FMLA itself doesn’t pay you, but it guarantees you can return to your same job or an equivalent one. Short-term disability benefits can be collected during FMLA leave; the two run concurrently rather than stacking.11U.S. Department of Labor. Fact Sheet 28 – The Family and Medical Leave Act
Your employer must also keep your group health insurance in place during FMLA leave on the same terms as if you were still working.12U.S. Department of Labor. Employment Laws – Medical and Disability-Related Leave
Maryland Flexible Leave Act
One boundary to note: the Maryland Flexible Leave Act, which applies to employers with 15 or more workers, lets employees use accrued paid leave to care for an immediate family member (a child, spouse, or parent) who is ill.13Maryland Department of Labor. Flexible Leave – The Maryland Guide to Wage Payment and Employment Standards It does not cover your own illness. If you are the one who is disabled, whether you have paid leave to draw on depends on the sick leave or PTO your employer independently offers.
Workers’ Compensation Is a Separate Track
If your disability arises from a work-related injury or occupational illness, Maryland’s workers’ compensation system is the appropriate avenue, not short-term disability insurance. Most short-term disability policies explicitly exclude work-related conditions, so filing the wrong type of claim wastes time you may not have.
How Short-Term Disability Benefits Are Taxed
Whether benefits are taxable turns on who paid the premiums. If your employer paid and you never included that cost in your taxable income, the benefits you receive are fully taxable as ordinary income. If you paid the premiums yourself with after-tax dollars, the benefits are not taxable.14Internal Revenue Service. Publication 525 – Taxable and Nontaxable Income
When premiums are split, only the portion of benefits attributable to the employer’s share is taxable. The share tied to your after-tax contributions comes to you tax-free. Sick pay from an employer-funded plan is also generally subject to Social Security and Medicare withholding, though payments made more than six calendar months after you last worked are exempt from those payroll taxes.15Internal Revenue Service. Publication 15-A – Employer’s Supplemental Tax Guide
Worth thinking about before enrollment: paying premiums yourself with after-tax dollars lowers your take-home pay now, but the benefit arrives tax-free when you need it. Letting your employer cover the premium is cheaper today and produces a smaller check later.
Filing a Claim
Specific steps depend on the policy, but the shape is consistent. Start by reading the policy documents closely, especially the notification deadline and the plan’s definition of disability. Many policies require you to report the disability within 30 days. Missing that window is one of the most common reasons claims are delayed or denied.
Expect to submit medical documentation from a licensed provider: a physician’s statement covering diagnosis, treatment plan, and an estimated return-to-work date at minimum. Some insurers ask for lab results, imaging, or specialist evaluations, and most require periodic updates to confirm the disability is ongoing.
Insurers typically complete an initial review in about 10 to 14 business days, though complex claims take longer. Benefits begin once the elimination period ends and are usually paid weekly or biweekly. If an insurer delays without explanation, Maryland’s unfair claim settlement rules give you grounds to escalate.
If Your Claim Is Denied
Denials happen, and the denial letter is the most important document you’ll get. Insurers are required to state in writing exactly why they rejected the claim. The usual reasons are insufficient medical evidence, a condition that doesn’t meet the policy’s definition of disability, or inconsistencies in the application. That letter is your roadmap: it shows precisely what the insurer thought was missing, which is what your appeal needs to fix. Most policies require appeals within 60 days of the denial.
Appeals Under an ERISA Plan
For an employer-sponsored plan, federal ERISA rules mandate a structured appeals process. The insurer must give you a full and fair review, let you submit new evidence, and provide the claim file on request. On disability claims, the insurer has 45 days to decide the appeal, with a possible extension if more information is needed.16eCFR. 29 CFR Part 2560 – Rules and Regulations for Administration and Enforcement
If the appeal fails, you can sue in federal court. ERISA cases are unusual: the court generally reviews only the evidence that was in front of the insurer when it decided. New evidence typically won’t be considered. That makes the administrative appeal the moment to load in every relevant record; anything you leave out at that stage may never be heard.
Appeals Under a Private Policy
For a private policy not subject to ERISA, follow the insurer’s internal appeals process, then, if needed, file a breach-of-contract lawsuit in state court. You can also file a complaint with the Maryland Insurance Administration if the insurer acted in bad faith, such as denying a clearly valid claim or failing to investigate properly.9Maryland Insurance Administration. File a Complaint State-court claims allow broader discovery and the possibility of damages beyond the unpaid benefits themselves, which gives policyholders more leverage than the narrower ERISA framework.
Fraud Carries Real Penalties
Exaggerating or faking a disability is treated as insurance fraud. Insurers investigate suspicious claims through medical record reviews, surveillance, and independent medical examinations. Getting caught working another job while collecting benefits, submitting false medical records, or overstating symptoms carries consequences well beyond losing the benefits.
Penalties scale with the amount fraudulently obtained. If the value is less than $300, the offense is a misdemeanor punishable by up to 18 months in jail and fines up to three times the claim value plus $10,000. At $300 or more, it becomes a felony punishable by up to 15 years in prison, with similar fines.17Maryland General Assembly. Fiscal and Policy Note for House Bill 1499 – Workers’ Compensation – Self-Insured Employers – Suspected Fraud Reporting Insurers can also pursue civil restitution to recover everything they paid out.