Disability Insurance - Short-Term and Long-Term

Short-Term / Long-Term Disability Insurance, Injury / Illness, State-Mandated, Voluntary Benefit Programs, Social Security Disability

Russell Benefits Consulting, Indianapolis, Indiana, provides both short-term and long-term disability insurance coverage, whether as a company sponsored benefit or on a voluntary basis that employees may elect to purchase at their own cost.

The average  40-year old worker is 50% more likely to be disabled for 90 days or more than he does of dying before age 65. Disability insurance pays a portion of the insured employee's income when unable to work due to an injury or illness. This is vital to protect financial stability while out of work.

How Disability Insurance Works

Three basic ways to receive receive disability income exist, depending on available coverage:

• Employer-sponsored short-term disability insurance - required in most states; benefits of up to 60% of salary
   
• Social Security disability benefits - paid when disability is so severe, employee is not expected to be able to return to work for at least 12 months
   
• Individual long-term disability insurance - replaces income after all short-term benefits end; replaces portion of salary not covered by other policies
   

For most workers, even those with some employer-paid coverage, an individual disability income policy is the best way to guarantee continuous income in the event of a major injury or illness.

Disability insurance can replace from 50% to 70% of an employees gross income. However, disability premiums paid by the employee are non-taxable, bringing their income close to (and occasionally over) their average net take-home pay level.

Types and Features of Disability Insurance

Two types of disability protection are available: Short-Term Disability (STD) and Long-Term Disability (LTD):

• Short-Term Disability (STD) - has a waiting period of up to 14 days with a maximum benefit period of two years
   
• Long-Term Disability (LTD) - has a waiting period of several weeks to several months with a maximum benefit period up to lifetime protection, depending on policy coverage

Disability insurance has two important protection features available that should be incorporated into the policies for your employees' continued protection.

• Non-cancelable - policy cannot be canceled by the insurance company, except for nonpayment of premiums. Covered employees may renew the policy every year without an increase in cost or a reduction in benefits
   
• Guaranteed renewable - same as above, with the exception that the insurer may increase premiums for an entire "class"

Options to Consider for Disability Coverage

In addition to the traditional disability policies, you should consider several options when selecting a disability plan:

• Additional Purchase Option - allows employees to purchase additional coverage at a later time
   
• Coordination of Benefits - makes up the difference between benefits not paid by other policies and the target amount specified in the policy
   
• Cost of Living Adjustment (COLA) - protection against inflation; increases your disability payments based on the increased cost of living measured by the Consumer Price Index
   
• Residual or Partial Disability Rider - allows employee to return to work on a part-time basis and collect a portion of their salary; receives reduced, partial disability payment
   
• Return of Premium - requires insurance company to refund portion of premiums if no claims are period of time as defined in the policy
   
• Waiver of Premium Provision - policy premiums are waived after 90 days of disability
   

Employee Benefits Administrator Groups

To remove the burden and cost from employers, we also administer these programs. Learn more at Employee Benefits Management / Administration