Most employees today are not prepared to handle the financial impact of loss or no income during an illness or injury that would result in time away from work and a regular paycheck.
Each year, we read that thousands of individuals (employees) file for bankruptcy due to escalating medical expenses, but that’s not necessarily true. Loss of income is also a major part of the equation. Without wages, the majority of the working population cannot pay their normal monthly living expenses, including mortgage, auto, insurance, utilities, food, etc. The list goes on.
The insurance industry offers a variety of disability coverage to replace loss of wages. Two significant plan offerings, in particular, will be beneficial to employers and employees:
- A short-term disability plan (STD) provides coverage for an employee’s loss of wages, usually from a three- to six-month period, though some plans extend up to 12 months. STD plans will cover about 72 percent (the national average for claims duration of less than six months) of all disability claims.
- Long-term disability plan (LTD) provides an employee with coverage of loss wages for a period to the employee’s normal retirement age (currently the age is 65, 66, 67, and 68) based on the Social Security tables and date of birth. LTD coverage is useful for employees suffering from a critical injury or a serious illness.
There are numerous plan designs for each of the coverages noted above.
There are other forms of disability insurance, individual plans, and contributory group plans with numerous plan designs and lengths of coverage.
Social Security provided disability coverage for those employees that are deemed “totally and permanently disabled.” The Social Security Administration normally takes up to 12 months to approve benefits for a claimant. From 2007 through 2016, Social Security has only approved 33 percent of all claims presented. Currently, 51 million working adults in the United Sates are without any disability insurance plan.
By the Numbers
Some interesting factors relating to income protection:
- Only 13 percent of the working population has enough income to cover three months of living expenses.
Risk factors to income interruption (disability):
- 47 percent of the working population has a high risk of cardiovascular disease
- 55 percent already struggle with debt issues
- 48 percent could not pay next month’s mortgage
There are three consistencies necessary for an individual’s working life:
- Health/medical needs – Medical Insurance
- Sometimes loss of wages from work due to illness or injury – Disability Insurance
- Death – Life Insurance
Disability insurance should be a staple for all employer group plans. It protects the employee’s most important asset: their ability to earn an income. This is coverage that all employers should discuss with their ARC benefit advisor.
ARC Benefit Solutions is prepped with the information you need to find a disability plan that is right for your employees and their families. Contact us today to find out what your options are.