While small employers may understand the benefits of long-term disability insurance to their workforce, many have misconceptions about its cost and may underestimate the desire employees have for this coverage.

Employers, whether they offer the benefit or not, understand the value of LTD for employees, and those that offer it also believe it serves the interests of their company, finds new research from the Consumer Federation of America and Unum. Employers not offering the coverage, meanwhile, are more likely to overestimate the cost of the insurance, underestimate the desire of employees for the coverage and to experience difficulty managing disabled employees and their absences.

Employers overwhelmingly (94%) disagree that “most employees have enough savings to cover normal living expenses if they become unable to work due to illness or injury.” And only a small minority of all respondents (13%) believes that Social Security and workers’ compensation “will cover most of a worker’s income if they become injured or ill.” 

Also see: Voluntary enrollment rates boosted with better data

Many employers believe that most (60% or more) of their employees would face significant financial hardship, like home foreclosure or bankruptcy, if they were disabled and unable to work for at least six months. Moreover, 86% of the benefit decision-makers interviewed agree that it is important “for employees to have long-term disability to protect them financially if they became disabled.”

Among those small employers that don’t currently offer LTD, about two-thirds (64%) indicated “the cost is too high for employees” and more than half (57%) said “not enough employees will enroll.” Forty percent expressed doubts that employees would value or appreciate the benefit.

And while six-in-10 employers without LTD cite employer costs as the main reason for not offering the coverage, many of these employers (38%) also admit they are not knowledgeable about what the monthly premiums would be. Forty-two percent of employers that don’t offer LTD thought the benefit would cost $30 or more per worker, according to the CFA/Unum report. But based on industry data, the typical range for an employer-sponsored LTD premium is $20-$30 per month.

Also see: Federal income protection caucus pushes disability protection

“How we educate employers is a big question,” says Richard P. McKenney, president and CEO of Unum. “I think we need to continue to work with employers to continue to educate individuals. There are tools and resources out there … we need to make sure they understand where to find those tools that can help them educate the rest of their workforce.”

The online survey of 504 benefits decision-makers at companies with 10-99 employees was conducted by research firm Greenwald & Associates on behalf of CFA and Unum.

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