Disability Insurance Plans

Long & Short-Term Disability Insurance Coverage

What are the chances your employees will need short-term disability insurance or long-term disability insurance coverage? Consider these statistics:

  • More than 1-in-4 of 20-year-olds become disabled before reaching retirement age.
    Social Security Administration, 2017.
  • In the last 10 minutes, 490 Americans became disabled.
    – National Safety Council®, Injury Facts® 2010 Ed.
  • In 2008, there were 2.1 million disabling injuries caused by a motor vehicle accident; compare this to 39,000 fatal motor vehicle accidents.
    – National Safety Council®, Injury Facts® 2010 Ed.
  • In the US, a disabling injury occurs every second, while a fatal injury occurs every 4 minutes.
    – National Safety Council®, Injury Facts® 2010 Ed.

Healthcare Consultants, an independent insurance agent in Houston, Texas, can assist you in setting up disability insurance for your employees as part of an overall group benefits program for your business. The disability insurance plans offered by Healthcare Consultants include “employer-choice” or “employee-choice” options, which include but are not limited to: elimination periods, benefit duration, and benefits as a percentage of salary.

Contact us now to discuss how we can help your business provide the right employee benefits and save you time in administering them.

About Disability Insurance Plans

There are two types of disability insurance plans available: short-term and long-term. Information about each is provided below.

Short-Term Disability: Insurance Coverage & Paid Sick Leave

A short-term disability is usually defined as an employee’s inability to perform the duties of the employee’s current position. Paid sick leave and short-term disability plans protect employees against loss of income during temporary absences from work due to illness or accident. Sick leave is provided to most full-time employees, and sickness and accident insurance to a significant but smaller number of full-time employees. Some employees have both sick leave and short-term disability plans, with the two benefits coordinated.

How Long Do Short Term Disability Benefits Last?

The duration of short-term disability benefits typically ranges from 13 to 52 weeks, although most employees are covered for up to 26 weeks. Short-term disability plans usually specify when successive periods of disability are considered to be separate disabilities and when they are considered to be a continuous disability.

When Does a Disabled Employee Become Eligible for Benefits?

Often, paid sick leave is available to an employee without any waiting period, and it may be used during the interim before sickness and accident insurance payments begin. Under most sickness and accident insurance plans, the disability must exist for at least one week before an employee becomes eligible for benefits. This waiting period is intended to control plan costs and simplify plan administration.

Sick Leave Pay & Maximum Days Covered

Sick leave usually provides 100 percent of an employee’s normal earnings, and the plan frequently specifies a maximum number of covered days each year that are permitted for paid sick leave (for example 13 days).

Other plans provide sick leave benefits (for example 30 days) per illness instead of per year. When used in conjunction with sick leave plans, sickness and accident plans provide benefits after sick leave benefits are exhausted.

Pay & Duration of Short-Term Disability Benefits

The level of sickness and accident benefits for short-term disability may be expressed as a dollar amount or as a percentage of employee earnings. The level and duration of benefits may increase with service. Generally, benefits replace between one-half and two-thirds of a person’s predisability gross weekly income. It is often thought that a higher replacement rate would create a disincentive for employees to return to work.

Who Pays for Short Term Disability Plans?

Employers generally pay for short-term disability plans. These plans may be financed under the following:

  • A group insurance contract with a private insurance carrier.
  • An employer self-insurance arrangement.
  • An employer-established employee benefit trust fund.
  • General corporate assets (such as for a sick leave plan).

Long-Term Disability Insurance Coverage

In most long-term plans, disability insurance coverage for the first two years is defined somewhat differently from disability under short-term plans (for example, an employee’s inability to perform the duties of the employee’s occupation vs. the duties of the current position). If the disability continues for more than two years, the definition of disability usually changes to the inability to perform any occupation that the person is reasonably suited to do by training, education, and experience.

How to Get Long-Term Disability Insurance

Private sources of long-term disability benefits include the following:

Like short-term benefits, long-term disability insurance benefits are integrated with benefits from other sources to produce reasonable replacement rates and to control costs.

When Does Long Term Disability Insurance Begin & End?

Long term disability benefits generally begin after short-term disability benefits (such as sick leave, and illness or accident insurance) expire. Most plans provide benefits for the length of a disability up to a specified age (for example age 65, when Social Security and employment-based retirement benefits usually begin).

Similar to short-term disability plans, long-term plans usually specify when successive periods of disability are considered to be separate disabilities and when they are considered to be a continuous disability. In addition, some long-term plans provide for continued payment of at least some disability benefits when long-term disabled persons engage in rehabilitative employment.

How Much Does Long Term Disability Insurance Pay?

Typically, long-term disability plans pay benefits amounting to approximately 60 percent of a person’s predisability monthly pay. However, some plans provide as much as 70 percent of predisability pay. Additionally, some plans contain a provision stating that private-sector long-term disability benefits plus Social Security disability benefits cannot exceed a stated amount (for example 75 percent of predisability salary). Most plans set a limit on monthly payments.

Paying the Cost of Long-Term Disability Insurance Benefits

The cost of long-term disability benefits may be financed by the following:

  • Employer contributions.
  • Employee contributions.
  • Employer/employee cost sharing.

Contact Brokers at Healthcare Consultants, Inc. for Assistance

If you have questions about disability insurance plans or other employee benefits, a broker at Healthcare Consultants Inc. will be happy to help.

Contact Our Consultants to Learn More

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