Between the ages of 35 and 65, seven out of ten workers will suffer a disability lasting three months or longer...

..according to the National Safety Council (report: National Center for Health Statistics). Group Short-Term and Long-Term Disability coverage helps your employees with the sudden loss of income that can be caused by a sickness or an accident. Employers who continue the payment of wages in the absence of a legal "actively-at-work" status are establishing dangerous precedents for future disabilities with their other employees. Employers are liable to provide the same open-ended approach to any employee who is considered disabled or unable to work - a costly and litigious situation, especially if you can't afford it.

An employer can establish a written sick-pay plan as a self-funded practice and be able to deduct those wages legally. However, this still exposes the employer to the un-insured risk (the wages) that must be paid, plus potential accounting requirements for reserves under FASB rules. Most employers find it to be more cost-effective to fully-insure their employees risk of disability from sickness and accident. (This should not be confused with employer-required workmen's compensation coverage which covers employees while at work.)

Most employers provide, at a minimum, short-term disability coverage, which typically pays wages up to a set maximum amount weekly, for a pre-established period of time. Benefits are typically payable on the 1st day of an accident and the 8th day of an illness. This is very beneficial to employees, who are not forced to use their own personal vacation time or go without income. This also prevents the employer from making wage payments to an employee unable to work, while being forced to pay additional wages for the disabled employee's replacement.

Long-Term Disability should be 'dovetailed' with short-term benefits. This is extremely important coverage, especially for owners, partners, and others directly responsible for the health of a business. Social Security disability benefits are next to impossible to get, so providing long term wage protection for employees is, in some ways, more important than basic life insurance protection. Employer-paid disability plans are always taxable to the employee upon receipt of benefits. If an employee is required to pay taxes on those wages, he will end up with around thirty cents on the dollar. There are ways to eliminate this tax issue, however, which should be discussed in detail before the implementation of a plan.

Most Long Term Disability plans provide for 60% of gross wages and compensation*, up to a maximum monthly figure, payable after the completion of an elimination period. Short Term Disability can be used to bridge that elimination gap. Benefit periods can range from 5 years up to an industry-standard To Age 65 period. Many will provide benefits due to maternity, and most are guaranteed issue, depending on group size.

*Group long-term disability contracts provide wage protection up to a maximum yearly income of $120,000 in annual wages. Highly compensated employees often face inordinately low replacement ratios, often below 50% of income because of monthly benefit 'caps' on group LTD. These individuals need additional coverage. For a discussion of supplemental executive Long Term Disability, click here.

An important factor to consider when choosing a Long Term Disability (LTD) policy for your employees is the definition of disability. You should purchase the policy that has the best definition of disability available within your price structure. Policies that require being under a physicians care, or that limit or restrict the definition of disability unrealistically should be avoided. An "own-occupation" definition is considered to be the best, but not always available

For employers who wish to provide this coverage but are unable to afford the premium, short and long term disability coverage is available to your employees on a voluntary basis, employee-paid, at group rates. This is ideal for the employer who wishes to provide enhanced employee benefits at no cost to the company.

For a quote, please complete the Group Disability Proposal. For questions, email us at the link below.

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