Disability insurance protects employees during extended periods of disability due of which they’re unable to continue working for their employees. Some people alternatively describe it as ‘income insurance’, this is due to the fact that an insured worker continues to receive their monthly amount from insurance companies despite not receiving paychecks from their own employer.
The amount reimbursed to the disabled employee depends on the insurance provider; good policies give amounts which come close to the paycheck an employee would have otherwise received if they weren’t affected by their disability.
There are two variants of disability insurance
- Long term disability
- Short term disability
Short term disability (STD) will pay employees a certain fraction of their income for a short period of time once they have exhausted all their paid sick leaves. The duration it covers can span anywhere from three months to a full year.
Long term disability (LTD) will pay employees a certain portion of their income once both their sick leaves and STD benefits have been used up. As the name suggests, LTD will pay disabled workers for a substantially longer period of time which can range anywhere from 2 years to 5 years or even until workers reach their official age of retirement.
Why is disability insurance important as an employee benefit?
The U.S Census Bureau has estimated that on average, an employee has about one in five chances of becoming disabled. The importance of disability insurance doesn’t quiet hit home until an employee is suddenly faced with the prospects of long term disability and without any financial backup.
The problems of no longer receiving a paycheck coupled with not being able to discharge financial obligations can easily take a mental toll on the disabled employee. It is not uncommon for injured workers to experience an onslaught of financial problems such as foreclosure of a mortgaged house, lack of adequate heating and food supplies and a general sense of despair overlooking the entire family.
In other words, it pays to acquire disability insurance as an employee benefit while one still has the opportunity.
Disability benefits are often overlooked
Despite the consequences of a possible disability looming in the future, few new hires ever take the time to consider the disability benefits offered by their employers. Most assume they will never have to use disability benefits, but according to surveys conducted by Social Security Administration, around 56 million Americans, or 1 in 5 live with disabilities. Empirical data has proven that disability is unpredictable and can happen to anyone at any age.
Another alarming statistic which should serve as an eye opener is that 1 in 4 of all 20 year old Americans become disabled before they’re able to reach the age of retirement. For this reason, more enlightened employees consider insurance coverage to be as important as life insurance.
According to Employee Benefits Survey in 2016, short term disability (STD) benefits are offered by 78% of employers while LTD benefits are offered by a smaller but still sizable portion, which is roughly 63%. To remain competitive, firms must offer disability insurance as a part of their comprehensive employee benefits program.
