PrintA strong benefits package is a great way to attract and keep employees. And while many small businesses offer health insurance, life insurance, and flexible spending accounts, fewer than half offer disability insurance.
Studies show that nearly half of all employees live paycheck to paycheck, with little savings in case they are unable to work. Disability insurance gives those employees some reassurance that if they should become ill or have a debilitating accident, at least some of their income will still come to them.
Don’t confuse disability insurance with workers’ compensation. Workers’ comp covers care for injuries sustained on the job, while disability insurance covers a portion of salary for injuries or illness that prevent a person from working and are sustained outside of the workplace.
Disability insurance comes in two forms: short term and long term. Short-term insurance lasts from three to six months, while long-term insurance covers anywhere from a few years to several decades; some policies last until the disabled person is eligible for Social Security. Many employers choose to offer both, or package them together, because many short-term disabilities can turn into long-term problems. Seamless integration helps ensure that case management is efficient.
Long-term disability insurance takes over when short-term disability insurance ends and pays an employee a percentage of his or her salary, generally 50 percent to 70 percent. How each insurance package defines “disabled” differs. For example, disability due to some diseases may be excluded; some plans only pay if the individual can’t do any job, not just his or her current job. Therefore, it’s important to read the policy carefully and choose the one that offers the right benefits to your employee population.
Just like health insurance, how small business owners choose to pay for disability insurance varies depending on the company. Some pay 100 percent of premiums; others offer group discounted rates and allow employees to opt in and pay their own premiums each month. Still others cost-share the premiums with employees. How you choose to offer disability to your employees depends on how much of the monthly costs you can absorb, and the cost of the plan.
The good news is disability insurance isn’t expensive. In fact, it’s one of the least costly benefits you can offer. And considering that one in five employees will become disabled before they reach retirement age, it’s a good benefit to offer. On average, a seamless short-term to long-term disability insurance plan can cost from $300 to $450 per year per employee, or about $30 a month.
So what’s the best plan for your small business’s employees? Consider these items when comparing plans from different carriers:
- Rehabilitation services: The goal of any good insurance program should be to help the employee get back to work. What kind of rehabilitation does the carrier pay for? Does the carrier have a good track record of working with health insurance coverage to provide rehab services?
- Ability to coordinate with other providers: Will your disability provider work with your health benefits insurer to provide the best possible coverage in many different scenarios?
- References: Ask members of your industry association for recommendations; after all, they understand your workforce and the specifics of your industry and can offer good recommendations.
Disability insurers should have a strong focus on returning your employees to productivity, whether that means coming back to work for you in the same job or something adapted to the employee’s abilities. Either way, it can be a big benefit to your workforce and generally pays for itself. The return on your investment comes in the form of a strong benefits package that brings your workers back to health quickly.
Emily Esterson is a contract writer, editor, and publisher specializing in small business topics.
