People readily understand the importance of insuring their home, car and other possessions against damage or loss, but we rarely think about insuring ourselves — and our potential to generate income — in the same way. Fortunately, more employers are beginning to understand the value of disability income insurance — and more employees and prospective talent are as well.
Even though one in four adults will become disabled and out of work for at least a year at some point before reaching retirement age, according to the Social Security Administration, most of us think it will never happen to us. Without proper coverage, the cost to an individual or family can be devastating, and it also has a significant impact on business. Poor health, resulting in impaired performance or outright absences, costs U.S. employers $530 billion a year, according to the Integrated Benefits Institute.
While a federal social security disability program exists today, and a number of states offer or are considering paid short-term disability, these programs don’t always provide the level of protection necessary or cover long-term situations. The FMLA provides eligible employees with up to 12 weeks of job-protected leave per year (and requires that their group health benefits be maintained during the leave) for various life events — but doesn’t’ require the leave to be paid.
So if your organization is thinking of adding a disability income insurance benefit to your total compensation package, or enhancing an existing program, here are a few factors to keep in mind.
View disability insurance as a competitive advantage. Small businesses make up 99.9% of all businesses in the U.S., and employ about half the workforce, according to the Small Business Administration. And while larger companies might be able to offer bigger salaries, smaller companies have the potential to offer greater work-life flexibility, visibility and opportunity. Add in a highly competitive benefits package, your small business could suddenly have a critical edge when it comes to attracting and retaining talent.
Understand the hidden costs. When an employee is diagnosed with a serious illness, suffers an injury or becomes pregnant, they want to know that they will still have a steady income to help manage expenses. In a smaller organization, the impact of employee disability can be especially acute. In addition to the obvious loss in productivity, there is a hidden dynamic that companies don’t always consider: the motivation and concern of the remaining employees. Are they worried about whether or not their absent colleague will be able to make ends meet? Or do they have peace of mind knowing that their colleague has help?
Consider short-term and long-term disability. Balance is essential. Short-term disability events are more common, but long-term disability has a much greater impact on both employer and employee, so it’s best to cover the full range of possibilities. Short-term disability benefits may begin after a short elimination period, about seven days, and typically last for 13 or 26 weeks. Long-term disability benefits often kick in after the short-term benefits end and can provide payments for a specific number of years or until the employee reaches retirement age.
Evaluate providers who can offer complementary resources. Implementing a disability income insurance plan can be cumbersome. Moreover, small businesses often don’t have the staff, experience or technology to support a comprehensive benefits offering, which is why successful businesses often work with outside providers that offer needed infrastructure, expertise and flexibility. Choose a company that specializes in helping businesses like yours select the right plan for your organization. Some things to look for: a simple claims process, a clear explanation of benefits, fast and secure technology that’s compatible with existing systems, knowledgeable customer support and compassionate claims processing. Some providers also offer an EAP, which can provide your employees with a number of additional resources.
