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Employers have been expanding their voluntary benefit offerings over the past few years to help employees deal with challenges and financial pressures related to COVID-19 and record-high inflation. Understanding the types of disability benefits and why employees value them can help employers decide whether to include them in their voluntary benefit offerings.
What Are Disability Benefits?
Disability benefits provide a guaranteed income or job protection to employees who are unable to work due to a serious injury or illness. Common causes of disability include depression, anxiety, chronic illness, and pregnancy. Disability insurance can provide a safety net for employees, allowing them to pay their bills and provide for their families while they are unable to work.
The Value of Disability Benefits
According to the Social Security Administration, one in four adults will become disabled before reaching retirement age. Many employees are ill-equipped to lose their income or are unable to afford unexpected medical expenses. Income or job loss due to a disability can be devastating for employees and their families.
Providing disability benefits can be important to an employer’s overall benefit strategy and attraction and retention efforts. It can show an employer’s commitment to their employees’ well-being. Employees value this benefit because it provides them with financial support when illness or injury prevents them from working.
Rising medical costs related to treating chronic conditions, disabilities, and serious injuries make disability insurance more critical than ever. Employers who integrate their health and disability benefits can improve their workforce’s overall health by coordinating employees’ care, allowing earlier interventions, and decreasing workplace absenteeism.
Types of Disability Benefits
There are many different types of disability benefits including short term disability (STD), long term disability (LTD), critical illness, paid leave programs, and long-term care insurance. Understanding the different types of disability benefits can help employers determine which benefits to offer their employees.
Short Term Disability Insurance
A STD policy can replace a portion of or all an employee’s income due to a temporary disability. Employees may receive a specified percentage of their income, depending upon their policy. The policy is paid either fully or partially by the employee.
Employers may want to offer this benefit because it helps employees remain financially stable while recovering from an illness or injury, allowing them to stay productive and focused when they’re physically able to return to work.
Long Term Disability Insurance
Long term disability provides income to employees who have a long-term illness or injury. Depending upon the policy, the employee will receive a specified percentage of their base pay. Like STD, employees receive benefits until they can return to work or have exhausted the policy limits. STD and LTD plans can work together, having LTD benefits begin when an employee’s STD benefits are exhausted. If an employee becomes permanently disabled, they may continue to receive disability benefits through their retirement date or until they are eligible for Social Security disability benefits.
If an employee is diagnosed with an illness that’s covered under a critical illness policy, they may be eligible for a fixed lump-sum payment. Payments are made directly to the employee and can be used to cover deductibles, co-payments, household expenses, or other costs. Premiums are typically paid by the employee.
Long-term Care Insurance
Long-term care insurance helps employees with coverage to treat chronic illness and disabilities outside of a hospital setting. This may include hospice care, assisted living, and respite care. Long-term care insurance can help employees safeguard their financial futures. Employers may want to offer this type of insurance to help their aging workforce.
State and Federal Disability Benefits
Employees may be entitled to disability benefits under state or federal law including FMLA, providing disabled employees with reasonable accommodations, or workers’ compensation benefits.
Disability benefits can provide sick and injured workers with financial stability and peace of mind when they are able to work. Understanding the value and different types of disability insurance can help employers decide which types to offer their employees. Offering disability benefits can be a powerful tool to improve an organization’s attraction and retention efforts. Download the bulletin for more details.
National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.