Benefits Administration, Voluntary Benefits

The Importance of Disability Insurance and Why Your Company Should Offer Multiple Options

May 19, 2021 | Winston

According to Simply Insurance, roughly 375,000 Americans become completely disabled each year. With numbers like these, it’s shocking to realize that 110,000,000 Americans don’t have long-term disability insurance, and 48% of U.S. adults claim they only have enough savings to cover three months of expenses if they were to stop working suddenly.

In addition, 5.6% of Americans in the workforce experience a short-term disability every year. Making it clear that having some form of disability insurance is crucial, but employees are often unaware of the disability benefits their company has or what they might need.

We decided to take a deeper look at the two types of disability insurance: short-term and long-term, to help your company determine if it’s time to reevaluate your offerings.

Short-Term Disability Insurance

Short-term disability refers to the type of disability that is either paid into by the individual or the employer, depending on the policy. It covers disabilities or illnesses, rendering someone unable to work over a temporary period. 

Short-term disability is just that, short. However, as an employer, if you are introducing a new voluntary short-term disability plan, you’ll have the option to set the length of the coverage period. For example, this can cover employees for nine weeks to a year. If you’re thinking about introducing a voluntary short-term disability plan, be sure to talk to your broker and other trusted partners. They’ll help you choose the right strategy that will coordinate with your sick policies, and any state disability plans your employees may have access to. The plus side of short-term disability benefits is that the policyholder will immediately receive their benefits following an illness or injury.

Long-Term Disability Insurance

As the name suggests, long-term disability insurance is for disability cases, leaving an employee unable to work over more extended periods, usually measured in years. As opposed to short-term disability insurance, long-term disability insurance is purchased by employers, and employees may choose to buy up additional coverage. 

Long-term disability benefits cover more of an employee’s pre-disability income; however, the benefits also take longer for the employee to receive because the waiting periods are longer. Again, if you’re considering changes to your disability offering, be sure to speak with your health and welfare broker. They’ll be able to help you coordinate short-term and long-term disability offerings that are right for your population, industry, and location. 

How To Help Employees Choose What’s Right for Them? 

In today’s competitive workforce, both insurance types are a minimum for a healthy benefits package. However, we understand how much the employer cost of benefits has increased, so we know that weighing all of your options is also critical. Voluntary plans are a great way to offer employees affordable, best-in-class coverage while keeping your budget in mind.

Of the two, most employees prefer to enroll in long-term coverage due to the larger payout they’ll have to fall back on. Even so, the waiting period takes months before they see any compensation. Unless your employees also have adequate savings to carry them through until their benefits come in, it could leave them and their families in a dire financial situation. Make sure as an employer you’re leaning on your benefits partners for help communicating the benefits of both plans. It is ultimately up to the employee to decide, but we always want to be sure they have the support to make the best-educated decision. 

Do you need more help deciding which disability insurance strategy is right for your company? Our experts at Winston can connect with you and your broker to help with the decision-making process, and the communications needed for employees before, during, and after new disability plans are introduced. Contact us today!


Disclaimer:  This content is strictly informational and should not be used as specific advice on insurance products, legal, accounting, and/or tax related matters. Insureds should always contact the appropriate licensed professional for their insurance, legal, accounting, or tax needs.

You May Also Like