Disability insurance is one of the many benefits employers offer to employees, but is often understated or overlooked. Understanding the different types of disability benefits and when to use them will help employees better understand the value of this insurance offering. Below you will find frequently asked questions and answers as it relates to disability insurance.
What Is Disability Insurance?
Disability insurance replaces part of an employee’s income for a specific period of time if they are unable to work due to injury or illness.
What Does Disability Insurance Cover?
While plans vary on what is covered, most disability plans cover a variety of illnesses, as well as serious accidents and injuries, which prevent an employee from working. Most people think disability is related to major injuries only. However, many common injuries can result in an employee being unable to work. It’s estimated that 25% of today’s workforce in their 20s, can expect to be out of work for at least a year due to some disabling condition before the age of retirement.
Long-Term vs. Short-Term Disability—What Are the Main Differences?
Disability insurance generally comes in two forms—long-term and short-term. The main difference between the two is the length of time you are eligible to receive benefits. While policies vary, short-term disability generally covers between three and six months. Long-term disability generally covers you for 5, 10, or 20 months, possibly even longer, depending on your plan.
Another difference is in the coverage amounts. Short-term disability usually covers a larger percentage of your income and can cover as high as 70% of your income depending on your plan. Long-term disability coverage is typically equivalent to 40-70% of your income, but is over a longer period of time. According to Guardian, to determine what amount you would need, calculate your monthly expenses and consider any additional medical bills you may have to pay. You should then determine what portion of your salary you would need to cover those expenses if you became disabled.
What Is the Most Common Cause of Disabilities?
The causes of disability injuries can be placed into two categories – accidents and illnesses. A common misconception about disability injuries is that they are mostly caused by some form of accident. As it turns out, only 9% of disabilities are actually caused by accidents. On the other side, 91% of disabilities are caused by illnesses, with musculoskeletal and connective tissue disorder (i.e. muscle, back, and joint pain) being the number one cause. It’s important to note that disability insurance is not typically for injuries obtained at work, or on the job. Those would fall under workers’ compensation insurance. If you are injured or suffer an illness, always check with your disability insurance provider to confirm you are eligible for and will be covered under your disability insurance.
Common Disability Terms
Here are some of the more frequently used insurance terms when it comes to disability. You can access the full list of these terms here.
— Elimination Period: also known as a “waiting period,” and is the number of days you will wait to start receiving your monthly payments.
— Benefits Period: the amount of time you will receive payments from your disability insurance while you are out of work.
— Benefit Payment: the total amount of compensation you will receive each month during your benefit period.
— Insured: the person who is protected and covered under the disability policy.
Overall, disability insurance is an important employee benefit that most employers offer as part of their benefits package. If you are looking to provide this benefit to your employees, or would like discuss the different options, QBS can help. Through our benefits administration services, we provide a wide range of medical, life, and disability offerings, as well as robust tracking methods to make sure your business is always ACA compliant. Our human resource professionals are also available to assist you with any employee concerns, including how to manage employee notifications and communication should you have an employee who needs to go on disability.
QBS’s team of experts is here and ready to guide you every step of the way—from obtaining the right coverage for your employees to appropriately managing employees needing disability.