Insurance protects your employees and their families against any unexpected financial losses. Health insurance protects against unexpected health expenses, and life insurance gives your employees’ families financial security after an unexpected passing. But what about disability insurance? What is it, and why is it important to offer to your employees?
Here’s what you need to know about it.
What is disability insurance?
Disability insurance, also known as disability income insurance or income protection insurance, is a type of coverage that replaces a portion of your employees’ income if an injury or illness prevents them from working. Disability insurance:
- Provides financial security for your employees and their loved ones
- Gives funds to your employees to use for whatever they like
Is it the same thing as health insurance?
Not exactly.replaces a portion of an employee’s income lost due to not being able to work because of injuries or illnesses. In contrast, health insurance covers medical expenses that arise due to an injury or illness.
What does disability insurance cover?
While people may think of major injuries as the only thing disability insurance covers, here are just a few of the things disability insurance might cover:
- Back pain
- Heart disease
It doesn’t mean injuries like sprains and fractures aren’t disabling. What it does mean is the scope of injuries that can prevent people from earning an income is broad.
Why is disability insurance important?
A massive 68% of non-government workers carry no form of disability insurance. With this in mind, here is why disability insurance is essential to offer—and necessary for employees to have.
- Injuries are all too common: The chance of missing months or years of work seems remote. But more than one in four 20-year-olds will experience a disability for 90 days or more before they reach 67, according to the Social Security Administration. Disability insurance covers those “what-if” or worst-case scenarios.
- Disability insurance covers risk: People tend to shrug off the risk because they think only about worst-case scenarios. But the leading causes of disability claims are:
- Mental health issues
- Musculoskeletal disorders affecting knees, back, and hips
- Digestive disorders such as hernias and gastritis
- Injuries including fractures, sprains, and muscle/ligament strains
Disability insurance covers the risk involved with being affected by injuries, situations, or illnesses.
- It prepares employees for long-term challenges: It’s common to plan ahead and think about how far you can go without one or two paychecks. However, not enough people plan for possible long-term or future challenges. A study of consumer bankruptcy filings found that the primary reasons for bankruptcy involved illness or injury of themselves or a family member.
- The Bureau of Labor Statistics report for 2020 found that in the previous year of 2019, 2.8 million non-fatal workplace injuries occurred. To put this in perspective, 118.3 million people worked full-time in 2019, which means 2.4% of all workers in 2019 sustained some type of workplace-related injury.
- Workers’ compensation only pays if the injury is directly workplace-related, and it can take, on average, two to three weeks to hear if a workmans’ compensation claim has been approved or denied.
- The average Social Security Disability Insurance (SSDI) benefit as of 2021 was $1,277 a month. That equals $15,324 annually — barely above the poverty guideline of $12,880 for a one-person household and below $17,420 for a two-person household.
Disability insurance gives employees an extra layer of protection to help prepare them and their families for any long-term challenges.
Consider offering disability insurance benefits
Absence of emergency savings and rising medical costs are a concern for many employees. Without added income protection, people may experience severe financial difficulty if they miss work due to injury or illness. Consider adding disability insurance benefits to your employee benefits package and be sure to talk to a trusted advisor to learn more.
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