Importance of Disability Income Insurance for Your Business & Employees

A businesses greatest asset is productive employees. An employee’s greatest asset is their ability to earn an income.  If an injury or illness sidelines an employee; the business suffers from loss of productivity and employee suffers from loss of wages.  Offering or providing disability income insurance is a smart investment in both your business and your employees.  It shows employees that you have a proactive strategy to for your business and to protect their financial well-being.  

 

Adding disability income insurance to your employee benefit package is very affordable, generally has a cost equivalent to increasing your employees’ wages by about 9 cents per hour.  Click here to get your disability income insurance proposal

 

What is the difference between Short-Term & Long-Term Disability?

 

Short-Term Disability 

Also called STD, this policy is for temporary disabilities and is designed to replace 60-70% percent of an employee’s income for a short period of time: typically, 3-6 months or until you can get back to work.

 

 

Long-Term disability 

Also called LTD, this type of policy is designed to last for many years – through retirement (age 65, 67, or Social Security’s normal retirement age) if needed – replacing 50-70 percent of an employee’s income.  

 

 

We guide our clients to determine which is the best option for their business and employees.  A majority of our clients provide short-term disability as a standard part of their employee benefits compensation package. 

 

There are 3 components to a disability income insurance plan that determines the benefit available for the employee:

 

  1. Disability Income Benefit – the amount of money that the insurer will pay either weekly or monthly to an employee.  This is based on the selected plan design but typically is 60-70% of an employee’s annual gross earnings.  For example: if an employee earns a $50,000 annual gross salary or equivalent in hourly wage, their disability income benefit may equal $577 per week or $2500 per month. 

 

  1. Disability Income Deductible – insurers will refer to this as the benefit ‘elimination period’ or ‘wait period’.  It is simply is the number of calendar days from the disability start date that must pass before benefits become payable. We like to refer to it as a ‘time-based’ deductible.  

The ‘deductible’ is selected in advance by the employer when setting up the plan for the business and employees; most common options are 7 and 14-days however there are options for longer durations: 30, 60, 90, and 180-days. 

 

  1. Income Benefit Duration – this is the number of weeks, months, or years that the disability income benefit is payable, per disability event, to the employee.  Common options selected by employers or employees are 13-week or 26-week benefit durations for short-term disability policies and 2-year or to Age-65 for long-term disability policies.  

There are a number of other benefits included in disability income plans including but not limited to, workplace accommodation, retraining education, as well as a survivor benefit (similar to a death benefit). 

 

We guide our clients to determine which is the best option for their business and employees.  A majority of our clients provide short-term disability as a standard part of their employee benefits compensation package. 

 

Click here to get your disability income insurance proposal

 

What About Social Security Disability Coverage?

Also called SSDI, this is coverage that comes as part of an employee’s Social Security benefits.  This is not to be confused with or a replacement of an employer offered disability income insurance plan.  SSDI or SSI is a federally regulated disability benefits that requires an individual has been gainfully employed in an eligible occupation and be diagnosed by a physician as totally disabled. SSDI benefits generally take 3 to 5 months to receive an approval. 

 

Please see the Social Security Administration website for more information.