It’s not something that anyone wants to think about, but it is an important aspect every business owner should consider. If something were to happen to one of your employees and they were unable to work for a few weeks or months, would your business be able to continue? Would that individual be able to cover their expenses if they were injured?
As a small business owner, not having disability insurance can put you in a difficult position. Disability insurance is an important safety net to have as a business owner and it’s an incredibly valuable benefit to offer your employees.
What is Disability Insurance?
Disability insurance is an insurance policy employers can purchase to help replace a portion of an employee’s income while they are unable to work. These funds can help to cover living expenses and medical bills.
Group disability plans typically offer a totally disabled employee a benefit of up to 60% of their pre-disability income up to a specified maximum.
Disability insurance is categorized into either short-term disability or long-term disability insurance. Each has different guidelines regarding how the claims are paid and utilized, but the premise is largely the same. For example, maternity leave is one common instance where short-term disability is utilized.
Disability insurance is important for both the employee and the employer. If one of your employees gets diagnosed with a heart condition or must undergo treatment for cancer, they may not be able to continue to perform the duties of their job. The policy not only helps the employee remain financially stable with temporary income, it also protects the employer’s investment in the employee by ensuring the employee can recover and get back to work!
A disability policy also gives the company the financial flexibility to hire someone temporarily to fulfill the tasks while the employee is out on disability.
How Disability Insurance Works: Case Study
Why are we talking about disability insurance? The need for benefits is something we encounter every day with our clients.
This particular company wanted to help their employee, so they began paying him out of pocket after he developed a health issue and needed to be out of the office for an extended period of time. This went on for months until the situation came up in conversation with our team at Advanced Benefit Solutions.
We reminded the employer that they had a disability policy in place that could have been used to help the employee get temporary income directly from the insurer. This also would have allowed the company to fill the employee’s role during the gap in employment.
Essentially, this company has paid out-of-pocket multiple times and was also unable to hire a replacement for the duration of the disability of their employee.
If we had been contacted when the employee was first diagnosed and needed to go on leave, we would have helped by working with the employee to file the claim with the insurance company. Both the employee and the company would be provided financial stability in this scenario. That is how disability insurance policies work when they are needed.
3 Reasons to Offer Disability Insurance to Employees
Disability insurance is important for protecting your business and ensuring your employees feel valued. It’s also a way to stand out with your benefit offerings: nearly 70% of private sector workers do not have long-term disability insurance as part of their employee benefits package!
As a business owner, you are responsible for complying with current laws surrounding equality for employee benefits. If you offer some form of disability insurance or income replacement to one employee, you must offer it for every employee. An unintended consequence of offering disability for one can lead to issues if it is not crystal clear that you offer insurance to everyone.
Here are three reasons to consider adding disability insurance to your benefits package:
- Increased Employee Retention
Disability insurance can be a valuable benefit that helps employers retain employees. When employees feel that their employer cares about their well-being, they are more likely to stay with the company long-term. This can reduce turnover costs and help employers maintain a stable workforce. - Improved Employee Morale
When employees have disability insurance, they may feel more secure in their jobs and less stressed about the possibility of being unable to work due to an injury or illness. This can improve their overall job satisfaction and productivity. - Tax Benefits
Employers may be able to deduct the cost of providing disability insurance as a business expense, which can reduce their taxable income. In addition, employer-paid disability insurance premiums are generally not considered taxable income for employees, which can make this benefit more attractive to workers.
*Please consult your tax advisor to confirm deductions.
Important Things to Know about Disability Insurance
Employers are not required to offer disability insurance, but adding disability insurance to your employee benefits package is an affordable way to expand your benefits offerings. Many of our clients are surprised by how affordable disability insurance is. However, you must meet the insurance company’s minimum enrollment requirement. We have clients that have created a plan with only three employees.
If you are interested in talking about a disability insurance policy or if you have questions about any aspect of your employer benefits program, get in touch with us at (800) 291-2009 or send us an email at info@abenefitsolutions.com today.
