Income Protection for Employees with Group Disability Insurance
Do you offer disability insurance to your employees as part of your group benefits plan? If not, is this a coverage you have considered including? It is important to know the basics of disability insurance and how you can help your employees protect themselves financially should a disability occur.
What is Disability Insurance?
Disability income insurance is a type of health insurance that is intended to protect an employee from loss of income if they are unable to work for an extended period of time due to a disabling injury or illness. Payments are usually made on a weekly or monthly basis for a specified amount of time during the length of the individual’s disability. This is a type of insurance employers can offer in their group benefits plan for employees. Disability insurance does not provide coverage for work-related injuries and accidents that are covered by workers compensation.
Why Offer Disability Insurance?
The Social Security Administration estimates just over 25 percent of today’s 20-year-olds will become disabled before age 67. This is a significant number of individuals who are at risk of losing their income due to disability.
Disability insurance is actually one of the more affordable benefits you can provide for your employees. Including this coverage in your group benefits policy adds value to your benefits plan, which could help improve employee retention.
Short-Term vs. Long-Term Disability
Short-term disability insurance usually has a waiting period of 7 to 14 days before benefits take effect, and benefits pay out typically until long-term disability coverage begins or until the person is no longer disabled, whichever comes first. This can be employer paid or employers can provide this type of coverage as a voluntary benefit for their employees, which means the employee pays the full premium amount.
Long-term disability insurance has a longer waiting period. Often the this type of policy takes effect after an employee has been out of work for 90 days or sometimes up to 6 months depending on how the policy is written. This coverage continues for a specific amount of time that is indicated in the policy or until either the individual returns to work, passes away, or becomes eligible for social security benefits, whichever comes first. Typically, employers provide this type of coverage as a group policy for their employees with the employer paying the premium.
Educating Your Employees
In a survey conducted by the Opinion Research Corp, more than half of the respondents indicated they do not understand group disability insurance. This extends to employees not even knowing if they are covered by a group disability insurance policy provided by their employer. In fact, 65 percent of employees indicated they believe they are covered by employer-sponsored coverage, yet only 32 percent of working Americans actually have access to long-term disability coverage through their employer (according to the Bureau of Labor Statistics).
It is important for employers to educate employees on this coverage. Make sure they are aware whether or not you are providing group disability insurance and what they need to do to be covered under your policy. If you don’t offer disability insurance, inform your employees and encourage them to purchase their own coverage in order to protect their income. You might consider offering a voluntary disability program if you aren’t providing a group disability plan. There is no cost for you to offer this option, but it gives your employees the opportunity to purchase it on their own if they desire the coverage.
Many workers think they are safer than they really are. They are underestimating their risk of disability and too often don’t think about protecting their income. Encourage your employees to take steps to protect themselves financially by purchasing disability coverage (either through the policy you provide or through a policy they purchase on their own) and to build up adequate savings to sustain themselves should a disability occur.
As your group benefits insurance consultant, we can provide you with different options for a group disability insurance plan as well as options for coverage through voluntary benefits. We can also assist you in communicating the value of the plan to your employees and helping them understand situations when coverage can be applied.
References: www.ebn.benefitsnews.com, www.DisabilityCanHappen.org
In addition to preparing financially, there are steps you and your employees can take to lower the risk of a disability taking place. The Council for Disability Awareness recommends these healthy lifestyle choices to help lower the risk of a disability occurring:
- Be safety conscious and avoid high risk behaviors, including substance abuse
- Consume alcohol in moderation or not at all
- Get effective treatment if affected by chronic health conditions
- Get regular checkups and age-appropriate cancer screenings
- Maintain a healthy body weight
- Maintain a healthy stress level
- Quit smoking
- Take care of your back
- Take care of your mental and emotional health
- Accidents are not usually the causing factor behind disabilities. The majority of long-term disability cases are due to health issues such as cancer, back injuries, heart disease, diabetes, and arthritis.
- Most disability cases are not work related so they are not covered by workers compensation.
- A majority of Americans are not prepared – either they don’t have disability insurance and/or enough emergency savings to last more than 30 months.
- The average long-term disability claim is just over 31 months.