Long Term Disability Insurance as a Voluntary Employee Benefit

Voluntary benefits are playing an increasingly important role as employers seek to craft customized benefits packages for a changing workforce. One of the most attractive aspects of voluntary benefits is that employers can put together a fairly large basket of options and then allow employees to pick and choose as they see fit. Among the options is long term disability insurance, a voluntary benefit more employers should consider.

Long term disability is an insurance product that replaces lost income should an individual be unable to work for an extended amount of time due to disability. Although policies differ, the general rule of thumb is that long term disability kicks in after 90 days of being unable to work.

This is not to say that the disability in question must be permanent. It could very well be a temporary disability as the result of a car accident, a household injury, or even a major illness. Permanent disabilities are usually addressed by way of Social Security benefits.

Disability Is an Ongoing Problem

Disability is an ongoing problem within the American workforce. So much so that the Social Security Administration estimates that 25% of current twenty-somethings will become disabled and entitled to benefits before reaching age 67. In addition, the administration also estimates that as much as 65% of private sector employees do not have employer-sponsored long term disability insurance.

Although not ideal, Social Security disability benefits are available to workers who are permanently disabled. But what about those whose disabilities are not permanent? Unfortunately, they are left to fend for themselves. But employers can help up by offering a voluntary long term disability benefit.

How the Benefit Works

BenefitMall is a general agency based in Dallas and representing more than one hundred insurance carriers. The company also works with thousands of benefits brokers around the country. They explain that long term disability insurance is growing in terms of its popularity as a voluntary benefit.

BenefitMall reminds brokers that a typical long term disability policy covers 50-70% of a disabled worker’s income when that person is unable to work due to physical disability. Coverage generally kicks in within 90 days and can last for the entire term of disability. In some cases, this means all the way to retirement.

Of course, all policies come with limits and restrictions. For example, there may be exclusions for disabilities resulting from preexisting conditions. There may be limits in terms of how disability is defined. Each policy needs to be examined in detail to understand fully what it covers and how claims are made.

A Cost-Effective Option

From the employer’s perspective, long term disability insurance is a cost-effective option perfect for a basket of voluntary benefits. Employers generally don’t have to pay anything for the insurance, though they can. Employees entirely bear the cost. So why not just get the insurance on their own? Because employer-sponsored insurance is usually less expensive. Insurance carriers offer better rates through employers in order to encourage volume.

An employee already thinking about a long-term disability policy could be encouraged to move forward if it were offered as a voluntary benefit. Likewise, employees who have never considered the coverage might be prompted to do so through their voluntary benefits selections.

Voluntary benefits are increasingly more important as the American workforce grows and evolves. Employers looking for a good selection of voluntary benefits should consider long term disability insurance. Disability is a serious problem that can lead to tremendous financial stress. Long term disability insurance mitigates some of that stress by replacing lost income.