Contrary to popular belief, your biggest asset in business is not your capital, nor is it your product or service; it is your employees. Your employees are what drive the business and bring in revenues. As a business owner, you have to protect employees and workers as you would protect any other asset.
With that being said, disability insurance is a form of protecting employees, workers, and yourself. If you are wondering whether you should offer this type of insurance, then you’ve come to the right place!
Here, we will inform you of what this insurance policy entails and the benefits of offering it to the people you employ:
What Is Disability Insurance?
In the event that an employed person becomes disabled or ill, disability insurance provides partial wages. It differs from worker’s compensation insurance, which also gives partial coverage, but only if an employee gets injured on the job. This means that even if employees get injured or ill out of the workplace, they will still have an insurance policy that will help them while they are out of work. Disability insurance won’t replace 100% of wages missed due to illness or disability, but it will cover around 60% of employee earnings.
Below are two types of insurance companies that do offer insurance may offer both types, while some companies might only have one to offer.
Short-term Disability (STD): An STD plan usually pays out between 9 and 52 weeks of missed wages, depending on the type of plan that is in place. There is an initial waiting period before the coverage kicks in, which can be anywhere between one week and one month. This waiting period is called an elimination period and usually the longer you wait for the insurance to pay, the less on premiums you have to pay for the policy.
Long-term Disability (LTD): An LTD policy usually pays around 50% to 60% of a person’s wages. The elimination period is typically 90 days. The payout from the insurance company is determined by the number of years of work that is indicated on the plan. So, there are plans that will pay out until the person reaches the retirement age of 65.
Some plans will work regardless of an employee’s current health condition.
What Does The Insurance Cover?
Disability insurance isn’t just about tragic or freak accidents. Though such accidents do happen, disability insurance covers many other things, such as back pain, cancer, diabetes, pregnancy, heart disease among other conditions. However, there is no coverage for long-term care after age 65. It’s important to know this because according to the Council for Disability Awareness, the majority of insurance claims filed are for illness and not for injury.
Now that you know some basics about disability insurance, the next question would be should you offer it. The decision is yours, but let’s look into how it benefits both employer and employee.
Group Plans
It is a wise decision to have disability insurance for companies that have 10 or more employees. When you have a group plan in place, you can receive more benefits that include paying lower premiums or having a tax-deductible premium. Group rates tend to have a lower rate so you can find a plan that fits your budget while also being suitable for your employees.
Attracts the Best Talents
Top potential candidates for a job will take into consideration the type of health benefits a company offers before they commit to signing a contract. Prospective employees want to know that they are covered if something happens to them, and disability insurance is one of the first things they’ll look for. It can put you in the competition with big companies that are able to snatch the best talents out there because they have insurance plans that keep employees content.
Helps in Decision Making
Most employees have sick leave that employers pay for. Sometimes, employers don’t know what to do when sick payment runs out. When should you stop paying for sick leave? Do you know when the employee is going to return to work? During this time, you have to make decisions concerning the employee. When you have a plan in place, these questions will not occupy your thoughts since you know your employee is covered.
Having to stop an employee’s wages or salary because of an illness or disability is not a decision that employers like to take. At one point, you will have employees that can get injured or ill. The bottom line is whether you go for LTD or STD insurance plans, it’s a solution that both employees and employers benefit from. Disability insurance is a good addition to add to your benefits package and one you should consider.