How to Choose the Right Health Disability Coverage Plan for Your Employees

Your employees are not immune to temporary or permanent disability due to a workplace or external illness and accident. While worker’s compensation will help foot the medical bills for treatment and recovery for workplace-related incidents, disability insurance will ensure they have a continuous and sustainable source of income regardless of what caused the disability.

However, data shows that only 35% of private sector workers have access to long-term health disability coverage. Employers need to do more to protect the welfare and income of their employees.

Here’s what you need to know about disability insurance and how to pick the right plan.

What Is Disability Insurance?

Your employee’s ability to work and earn income is perhaps their greatest asset. However, serious illness or injury can physically incapacitate them from work, reducing their earning potential, which puts their livelihood at risk.

Disability insurance protects your employees’ income when they cannot do work. It ensures they have enough income to support their family for an extended period. For this reason, most industry experts refer to disability insurance as disability income insurance. 

According to data, one in four workers aged 20 years and above are at risk of disability. Moreover, one in eight might experience a long-term disability lasting over five years.

However, not all disabilities suffered by your employee must be work-related. Unlike worker’s compensation insurance, disability insurance covers injuries and illnesses outside work. Also, if your employees have to use the coverage down the line, all benefits received will be tax-free.

The Different Types of Disability Coverage

There are two basic types of health disability coverage. These are short-term disability insurance and long-term disability insurance. Both types replace a portion of your income, typically between 50% to 80% depending on the policy. 

The benefits of both types of disability insurance coverage can go into repaying loans, paying living expenses, and savings. 

However, these two types of disability coverage are not bought the same. Moreover, they also work differently, given the varying needs of short-term and long-term disability.

Short-Term Disability Insurance

In most cases, most disabilities are temporary, keeping an employee out of work for mostly under a year. Short-term disability insurance replaces income for such short periods. Short-term disability insurance is the most common policy in group insurance plans purchased by employers.

Most short-term disability insurance policies pay benefits for three to six months and include rehabilitation features to help employees return to work faster.

Long-Term Disability insurance

Long-term disability insurance is more suited for more severe, lasting, and probably permanent disabilities. The benefits last for many years, even through retirement, if necessary. 

Employers can still purchase long-term disability insurance for their employees, though the employees can purchase it directly as part of an individual policy.

Physicians, business owners, and other high-income professionals are top candidates for long-term disability insurance as an individual plan.

Why You Should Understand Your Policy’s Definition of Disability

You can only choose the right disability coverage plan for your employees if you understand the definition of disability according to the policy. 

The most generous definition refers to “own occupation.” This means you can collect benefits if injury or illness prevents you from working in your current profession.

The other common definition, “any occupation,” entitles you to benefits if injury or illness prevents you from working any job. This is a more limiting definition compared to “own occupation.”

Typically, most providers will use “own occupation” as the policy’s definition for the first two years of a claim. Then, they’ll change the definition to “any occupation,” making it harder to claim benefits if you can still work another job. 

However, most policies are favorable, expanding the definition of disability after two years to award benefits to claimants earning less than 60% of their previous income over 12 months in any profession.

Consult an Expert

Disabilities can threaten the financial stability of most workers. Your organization can help them maintain a strong financial footing by providing health disability coverage as an employment benefit. Contact Goldstein Healthcare and learn which policy will work best for your business.

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