Short-term and Long-term Disability Insurance: Is it right for your employees?
According to the Social Security Administration, 25 percent of all people in their 20s will become disabled and unable to work before reaching the retirement age of 67. Disability insurance provides coverage for an employee in the event an employee becomes disabled and cannot work. Disability insurance is either short-term or long-term.
What You Should Know About Short-Term and Long-Term Disability Insurance
A short-term disability (STD) plan pays out a portion of an employee’s income generally from nine to 52 weeks depending on the structure of the plan and typically covers 60 percent of an employee’s wages. The short-term disability kicks in after a waiting period varying anywhere from one to 14 days. Many short-term plans include a special provision for benefits to begin the first day of disabilities due to an accidental injury.
During this time employees typically use sick time or paid time off (PTO) for living expenses until their short-term disability takes effect.
Long-term disability (LTD) picks up where short-term disability leaves off. Long-term disability insurance replaces 50-60 percent of an employee’s income. The benefits are paid out over the span of a certain number of years indicated in the plan document.
There are some states with state-mandated disability insurance requirements. You’ll need to make sure your organization is following all applicable laws for your area. Michigan does not require employers to offer disability insurance.
What about if you aren’t required to offer disability insurance? Should you?
If you can work it into your company’s budget, providing disability insurance might serve as an additional persuader to attract and retain talented employees. If your business doesn’t have the funds to pay for short-term and long-term disability coverage than offering coverage as a voluntary benefit is a great way to attract talent.
Offering these plans as voluntary benefits means that you enable the purchase, but the employees are responsible for paying the entire premium. This money will be deducted from the employee’s paycheck to cover the costs.
If you decide to offer short- or long-term disability insurance, make sure to communicate the benefits of these plans to employees.
JS Clark Agency Can Help
Short-term and long-term disability insurance is an ancillary or voluntary benefit you can offer to your employees as part of a competitive benefits package.
JS Clark Agency offers access to all kinds of employer benefits including disability insurance. To find out more information about our services visit our website at jsclarkagency.com. To learn how to get started with either short or long-term disability benefits or both, call us at 248.355.9600 or email us at firstname.lastname@example.org.