Disability Insurance is Paycheck Insurance
Short Term Disability vs Long Term Disability:
It’s not a matter of short term or long term, the best strategy is having short term and long term disability coverage.
Short Term Disability:
An American, age 35 or older has a 50% chance of being disabled for at least 90 days before they reach the Medicare eligibility age of 65. Short-term disability is statistically more likely to happen than a long term disability.
Meaning, someone could be out of work for a week or two, and it even that could have a substantial impact on their financial situation. An article released by CNBC reported that 63% of Americans are living paycheck to paycheck. These short term disabilities can happen to anybody from a sickness or some sort of injury, car wreck something like that, and it is an essential benefit to provide to employees for that reason and more.
Short term disability covers the insured first. It is most effective when combined with a long term disability plan.
Short term disability can cover the insured as soon as day one for accidental injuries and day 7 for sicknesses. The coverage period for the disability can go all the way up to 90 days or six months, and in some cases, all the way up to 24 months.
The elimination period and benefit period are very important terms to understand.
Elimination Periods (Number of Days for an Accident/Number of Days For a Sickness)
The first number you’ll see in an elimination period is for the amount of days needed to be out of work due to an accident for the policy benefits to start paying. The second number is the amount of days you must be exempt from work due to a sickness to start getting paid.
For example: (0/14) elimination period is 0 days for an accident and 14 days for a sickness. It is much better to get short term disability coverage through a group because the underwriting is usually guaranteed or simplified, and the elimination periods can go as low as (0/7)
There are no zero day elimination period sickness plans, but there are zero day elimination period injury plans. so if you got hurt today and couldn’t go to work for the next two days, you could be paid two days worth of your short term disability benefit.
How Much Of an Employee’s Income be Paid?
Most group disability programs allow for 60% of the employee’s gross income to be paid. The benefit is also tax-free in most cases, so the employee ends up seeing close to their regular wages assuming a 28% tax bracket and above.
63% of Americans are living paycheck to paycheck, so having coverage that kicks in immediately is very important, to make sure that bills get paid. Medical out of pocket costs can cause some stress, but those payments can be deferred. However, bills like: groceries, mortgages, car payments, and other immediate needs, continue coming in, and there’s not any government assistance for something like a short term disability.
More Reasons For Short Term Disability
Another example. women who are going to go on maternity leave if it’s not a benefit that’s offered by the employer. where they have, maybe a family medical leave act or something where they can use, short term disability is really good for maternity leave. It’s a great, great solution for that. and it’s a voluntary product so it can be brought in. and the people who are planning on having children can, benefit from having that option available to them.
Blue collar contractors. work a lot with their hands are another target candidate for short term disability. Workers. comp is a big expense for contractors. Not having accidents at the worksite, and keeping a good safety record is important for future job bids, and thus the growth and future of the company. Offering short and long term disability has been proven to significantly lower worker’s comp claims. We all know worker’s comp is for on-the-job accidents. But, often times, contractors, can find themselves in a position where an employee who is covered by worker’s comp had something happen where they got hurt on a Saturday outside of work and they knew that they were not going to be able to work. Then, Monday comes around, and the employee is put in a position of:
- Not being able to work for the next, 90 days or longer and they now realize they don’t have anything covering them
- Or they could show up already injured, and fake the injury on the job and then claim workers comp. Which is not good for the company. It’s bad for everybody overall, and there could be an investigation, and nothing good really comes from it.
It’s just not a good place to be. and offering. short term disability is an easy solution for that potential problem. Anybody that works in any labor intensive job, where they’re more at risk of not being able to work because they actively participate in physical activities outside of work where they are more likely to suffer an accidental injury should have this coverage. It’s really important to protect your income, especially if you have people depending on you and bills to pay.
Long Term Disability
Long term disability benefit periods will last for a longer period of time, and also have a longer elimination period. Most Long Term Disability policies have an elimination period that looks something like (90/90) or (180/180), meaning 3 months or 6 months of being injured or sick and out of work before the policy begins paying benefits. Ideally, it would be best to have a short term disability policy with a 3 month or 6 month benefit period that would provide income until the long term kicks in.
Employees, when they understand that these disability benefits are available, even if they are 100% funded by the employee, usually see the value and will purchase some sort of protection.