When an employee gets sick or injured, they have more than medical bills to worry about. They might also need time off of work, which means giving up their paycheck. By offering short-term disability benefits, you can help employees cover their bills during this kind of difficult period.
Here’s how this insurance works — and how you can use it to build a stronger benefits package.
What Is Disability Insurance?
Disability insurance is meant to replace a policyholder’s income when they can’t work because of an injury or illness. You or the employee pays a premium to the insurance company for coverage, and if the employee ever becomes disabled, the policy will start making monthly payments to replace their salary.
This kind of policy may have a waiting period — a minimum amount of time the employee must be out of work before they can start collecting benefits — as well as a maximum timeline for how long the policy will make payments.
What’s the Difference Between Short-Term and Long-Term Disability?
The difference might seem obvious at first glance, but there’s more to the story — particularly when it comes to the terms of payment.
Short-term disability insurance typically pays out quickly after an injury or illness. The waiting period will be 14 days at the longest, although some short-term policies start paying out immediately after a disability, according to the Insurance Information Institute. Long-term disability insurance takes longer: The waiting period could be several weeks or even months.
In exchange, long-term disability insurance keeps making payments for a longer amount of time. The longest a short-term disability insurance policy can make payments is two years, and depending on your carrier, the payout term can be shorter. Long-term disability insurance policies can make payments for years, continuing until a person reaches retirement age or even extending throughout their entire life (assuming they’re disabled during this whole time).
Why Offer Short-Term Disability Benefits?
Disability is all too common in the American workforce. According to the Council for Disability Awareness (CDA), every year 5.6% of American workers experience a short-term disability (one that lasts less than 6 months). The CDA also notes that nearly half of Americans couldn’t come up with $400 to pay for a surprise expense without taking out a loan or selling something.
Even without these considerations, going without a paycheck for several weeks could be devastating for an employee’s finances. Offering short-term disability benefits helps employees keep up with their bills so they can focus on recovery.
The Harvard Business Review found that employees want better insurance more than any other workplace benefit, which makes introducing group disability a strategic tool for improving morale and retention. Remember that insurers offer discounts on premiums for group insurance because the policy covers more people. So, even if you don’t pay for the coverage yourself, your employees still benefit — they’ll be able to buy disability insurance at a lower price than if they shopped on their own.
How Does Disability Insurance Work With Other Benefits?
By combining short-term disability with other employer benefits, you can give your employees more protection while also lowering your costs. For instance, insurers generally charge less for plans with longer waiting periods. You could set up a longer waiting period on your long-term plan to make it more affordable and then make up this gap with short-term disability coverage.
Another strategy is to combine short-term disability with supplemental insurance. Supplemental plans pay out a cash benefit for serious conditions like heart disease or cancer. In exchange for offering supplemental coverage, you could decrease the coverage on your disability plans, reducing the cost. If an employee has a serious problem that’s covered by the supplemental plan and they receive a large lump sum cash payout, they won’t need as much disability income.
When you meet with an insurance agent, ask them how they could combine multiple benefits like these to create the most cost-effective result.
How Can Employers Support Co-Workers During Disability?
When an employee goes on disability, reach out to them. Help them sort out their short-term disability benefits with the insurer and ensure they’re taking full advantage of every policy you’ve already paid for.
Even with this income, life can be challenging for employees on disability. Consider running a volunteer schedule with other employees willing to help the disabled staff member with chores, make them meals or just spend time with them.
Above all, keep up strong communication with the employee throughout the entire process. Stay in touch with the employee as they recover to see what you can do to ease them back into the workforce. Would they like to start by working at home? Going part time? Do they need special accommodations in the workplace to get around?
While you can’t save your employees from every accident or major health problem, adding short-term disability benefits helps you protect them from the financial burden that comes with life’s worst surprises.
Stay up to date on the latest health care regulations and trends for your small business: Subscribe to our monthly newsletter.