A new emphasis on voluntary benefits since the start of the Great Resignation has many employers looking at disability insurance. Whether offered as a short or long-term benefit, disability insurance goes above and beyond state-mandated disability programs. It is now more important than ever before. So much so that brokers need to be prepared to offer it.
One of the first things brokers learn about disability insurance is that it comes in many forms. They also learn that there are implications that come with offering disability insurance where state disability programs and workers compensation are also in play. There is a lot to know about this particular benefit.
As a starting point, here are five things that brokers should know about disability insurance prior to offering it to employers:
1. What It Covers
First and foremost, disability insurance offers cash benefits to subscribers unable to work due to some sort of illness or injury. The idea is to replace lost income while a person remains out of work. It is also important to note that the illness or injury keeping the person out of work doesn’t have to be work-related.
2. Short vs. Long-Term Coverage
Arguably, the most important thing brokers need to know is that disability insurance policies are broken down into two main categories: short and long-term. A short-term policy is designed to provide only temporary coverage.
There is no defined time limit for a short-term policy. On average, subscribers are looking at no more than 26 weeks. However, there are benefits that provide coverage for 13 and 52 weeks as well. The common denominator among all short-term benefits is that they have a built-in cap they will not exceed.
Long-term benefits tend to be indefinite, up to retirement age. A typical long-term policy pays between 50% and 60% of the covered employee’s wages until retirement. There is one exception though: some policies would pay benefits only for a certain amount of time if the disabling condition occurred before a set age.
3. Waiting Periods Are Almost Always in Play
Both long and short-term disability benefits have waiting periods attached. Again, there is no hard-and-fast rule for how long such waiting periods should be. On average, you are looking at seven days from the onset of illness or injury.
4. Worker’s Compensation Is Also in Play
Most states require employers to purchase worker’s compensation insurance through either a private carrier or state program. Brokers need to be aware that if disability benefits are likely to be reduced as a result of a subscriber receiving worker’s comp, employers need to know that. Likewise, employers have an obligation to inform their workers about it.
5. Permanent Disability Is Not a Prerequisite
Finally, permanent disability is not a prerequisite to collecting benefits. Any disability brought on by illness or injury is eligible for benefits as long as the covered subscriber is unable to work for a period of time following the waiting period.
BenefitMall, a brokerage general agency, encourages benefits brokers to study up on disability insurance. They say it is one of the more popular voluntary benefits employees are looking for now, especially in light of the potential for developing long COVID.
Voluntary benefits are a big draw among employees who are paid well but still looking for better situations. When pay and traditional benefits are similar across the board, employers with more attractive voluntary benefits tend to win the recruiting game. That is why it’s so important for brokers to learn everything they can about disability insurance for the purpose of giving their clients access to it.