Businesses in Maine and across the country face the challenge of rewarding employees and this struggle has surfaced in a meaningful way during the pandemic. It is essential to find the balance between a viable business budget and the satisfaction of the human capital of the company.
Disability insurance is one of the most affordable and valuable forms of financial protection for employees. Offering a disability plan emphasizes a company’s commitment to the health and financial well-being of its workforce, providing employees with an income when they recover of an accident or illness. An employee can recover peacefully without having to worry about where the next paycheck might be and allows them to focus on their immediate medical needs.
In addition to being a deductible business expense, this offer could impact the company’s workers’ compensation status. Once an employer-sponsored disability insurance plan is purchased, conversations with insurance and accounting business partners must take place.
Disability insurance is designed as short-term and/or long-term policies.
The short-term disability benefit is paid weekly. Group plan pricing is determined by contract design and group demographics (age, wages, industry). Here are some plan design considerations:
- > How many days will the employee be disabled before payments begin? A common plan design option is the first day following an accident and the eighth day following an illness. We see them going up to two weeks, which would keep costs exceptionally low, but could come at the expense of employee satisfaction.
- > How long will the payments last? The options are usually 13 weeks or 26 weeks.
- > What percentage of winnings will be replaced? Disability insurance does not normally cover full replacement. Insurance theory dictates that full replacement could encourage malingering – an incentive to remain disabled and not return to active capacity as soon as they are able.
Like short-term disability, long-term disability policies are priced based on company demographics and plan design. The long-term disability benefit is paid monthly rather than weekly, and the elimination period (the length of time between the onset of disability and the start of payment) can be adjusted to begin when the benefit ends. short-term disability. The benefit period may depend on the size of the business but should be designed to last at least five years or until the normal Social Security retirement age.
A group disability package has the added benefits of group underwriting and is exempt from medical underwriting, making the plan simple to set up and administer.
Curious to see how your benefits compare to other employers in your industry and community? Prime Insurance has a great benchmarking tool.
Founded in 1866 and serving clients in Maine and around the world, Allen Insurance and Financial is an independent, employee-owned insurance and financial services agency with offices in Camden, Rockland, Southwest Harbor and Waterville. Call 800-439-4311. AllenIF.com