Disability insurance provides coverage in the event that an employee is disabled and cannot work. Unlike workers’ compensation insurance — which provides benefits like partial wage replacement if employees get hurt on the clock — disability insurance replaces a portion of employee income when they can’t work because of an illness or disability.
Disability insurance will not replace all of an employee’s income but provides wage replacement benefits that cover, on average, up to 60% of employee earnings. Those payments usually go up to a cap, or a maximum monthly payout. Although that’s not ideal, receiving up to 60% of wages is still better than 0% — and having that income stream can be very important to an employee and their family.
What’s the Difference Between Long-Term vs. Short-Term
There are two types of disability insurance to consider short- and long-term. Short-term disability typically pays out a portion of employee’s income from 9 to 52 weeks depending on the plan. Short-term disability benefits generally kick in after a waiting period, which is usually set from seven to 14 days.
Long-term disability picks up where short-term disability leaves off. Long-term disability insurance usually provides about 50-60% of an employee’s base wages. Long-term disability benefits are paid out for the number of years indicated in the plan document. There are long-term disability plans that pay out partial wage replacement benefits until a certain age, such as 65 years old.
Some private companies offer both short-term and long-term disability insurance plans, whereas others leave people to buy plans as an individual.
Should You Offer Disability Insurance to Your Employees?
Offering disability insurance to your employees may serve as an additional motivator to attract and retain skilled, talented employees. If you decide to offer disability insurance, let employees know how important wage replacement can be if they’re ever disabled and cannot work. Even though the benefit will not cover 100% of the employee’s base wages, having some money coming in each month will help your employees.
Thinking of offering disability insurance to your employees? We can help you determine what cost-effective coverage works best for your team and your bottom line. Contact us today at 303.721.1145.