When faced with an employee who's been disabled, uninsured employers have few options. Do you continue to pay all or part of a salary? Offer unpaid leave? Terminate employment? For an employer and employee, the choices can be devastating. Disability insurance as an important benefit in your companies benefits package offering. There are two components long term disability and short term disability.
Short Term Disability (STD) Insurance
An injured employee is worried about many things, including surviving without a paycheck. If the accident happened off the job, Worker''s Compensation won''t cover it. If an employee has to rely on savings, research shows this will last on average just 4.8 weeks. An insured Short Term Disability plan can replace up to 100% of the income lost due to injury of sickness. Focusing on short term disability is the first step to gaining control of overall disability costs. A well-managed STD plan can help an employer identify, track and handle claims professionally and consistently. Active claim management through a fully-insured plan can help shorten the duration of disabilities through rehabilitation and return-to-work efforts, reducing your costs and preventing short term disabilities from turning into long term ones.
- Will our Worker''s Comp cover short term claims?
62% of disabilities occur off the job. These are not covered by Worker''s Comp.
- Doesn''t State Disability pay for short term disabilities?
Yes, but SDI only pays 55% of income up to $334 per week. An STD plan can be designed with higher percentages and maximums to replace a larger amount of income. The STD plan will pay on top of SDI to these higher amounts.
- Does an insured STD plan cover pregnancies?
Yes, pregnancies are covered as any other disability.
- How often do short term disabilities occur?
The average occurrence of STD claims is 65 per 1,000 insured lives per year.
Long Term Disability (LTD) Insurance
An insured Long Term Disability plan will replace up to 66 2/3% of an employee's income up to the age of 67 in a situation where catastrophic illness or injury exists. A managed LTD plan allows an employer to outsource the difficult decisions surrounding a disabled employee to disability experts. Along with income protection, most disability plans offer rehabilitation and return-to-work services that are essential to the recovery of disabled employees. The goal of Long Term Disability insurance is to financially protect and proactively return disabled employees to a productive life.
- How many people really use their LTD plan?
There is a 1 in 5 risk that a 35 year old will be disabled for 90 days or more before age 65. You are more likely to become disabled than to die during your working years.
- How much will LTD cost the company?
The general rule is that a fully insured LTD plan will cost a company about one half of one percent of the company's monthly payroll.
- Will an LTD plan pay a disabled employee who returns to work on a part-time basis?
Yes, most LTD plans will pay an employee who is limited from performing all of their job functions, and has suffered a 20% or more loss of income as a result.
- What are the most common income replacement percentages?
Most companies implement a plan that replaces 60% or 66 2/3% of an employee's income in the event of a disability. The highest percentage available is 66 2/3%.