Disability Insurance: Do Your Employees Understand This Benefit?

Although everyone’s story is unique, most of us have experienced the stress and uncertainty that comes with facing challenges for which we never expected or planned. When an illness or injury keeps an employee out of work without a paycheck, their financial security may be at risk. To mitigate that risk, there is a renewed focus among employers and their HR teams to offer disability insurance and education about its income protection facets.

The education aspect is critical because, despite its importance, disability insurance may be more difficult for employees to personally connect to and understand the potential need. When reviewing benefit options, medical, dental and vision may take financial priority over disability insurance. While disability may be something people don’t like to think about, these situations can happen to anyone. According to the U.S. Social Security Administration, American workers have a 1 in 4 chance of developing a disability before reaching full retirement age.

Given all that, it’s sound practice for employers, insurance carriers and brokers to provide education around disability insurance and its benefits as part of a financial strategy. Providing this clarity — before, during and after an employee experiences a disability — may help preserve the financial progress employees have made and maintain their productivity and performance.

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The Why and What of Disability Insurance

Employees count on their income to pay bills, care for their loved ones and plan for the future. Whether planning for the arrival of a new baby, having a scheduled or unforeseen medical procedure, or facing mental health challenges, disability insurance benefits help replace part of an employee’s income when a covered condition prevents them from working. It provides financial support while they take time to heal, and it may be available to employees more often than they realize.

Here are the basics:

What is it? Disability insurance can be leveraged in a variety of ways to provide income protection. Short-term disability insurance can protect an employee’s income if they are unable to work for a short period of time due to an injury, illness or birth of a child. Long-term disability insurance is designed to protect an employee’s income if they are out of work for an extended period due to a more serious injury or illness.
When do benefits begin? That depends on the distinction between short-term and long-term disability coverage.
- Short-term disability coverage typically begins one to 30 days after an employee is unable to work. Under short-term disability, benefits typically last up to 26 weeks for injury or illness and up to eight weeks for maternity. If an employee’s situation continues and they have long-term disability insurance, an employee may be able to receive long-term disability benefits.
- Long-term insurance coverage typically begins 90 to 180 days after an employee is unable to work. During this period, they can receive a monthly benefit payment based on employer plan designs. Under a plan, employees who qualify could receive benefit payments until they reach retirement age, depending on their age. Restrictions and contract limitations may restrict benefit duration. Employers can work with an employee benefits broker to design a plan that meets their budget, including employer-paid and voluntary options.

The Positives for Employers

In addition to providing financial support for employees, disability insurance also benefits employers. Whether short- or long-term, disability insurance contributes to a comprehensive rewards strategy and can support employers and their HR teams in attracting top talent. According to the National Compensation Survey from the U.S. Department of Labor’s Bureau of Labor Statistics, approximately 40% of workers have access to short-term and long-term disability insurance, allowing you to offer a unique and meaningful benefit.

Disability insurance also provides a path for employees to focus on their healing and successful return to work, leading to continued productivity and retention. Without disability insurance, employee focus and engagement may decrease, and performance may decline as they face pressures such as lost income, unpaid medical bills or uncertainty about the future.

Keeping Benefits Top of Mind

To help employees effectively use disability insurance during a qualified time of need, it can be advantageous to provide clarity to employees about:

The value of disability insurance;
What they can expect; and,
How to navigate the claims process.

Providing this education before employees need to exercise this benefit is critical. Consider ways to make this education understandable and consumable through helpful tools such as: