Disability insurance, both short-term and long-term, can be used in the event an employee finds themselves injured and unable to work. Read on to learn more about this important topic!
Disability insurance is offered through an employer’s benefits package
as supplemental insurance in the event that an employee is temporarily disabled. The insurance can provide financial assistance while the employee is on a medical leave. Some employers can contribute toward a portion or all of the coverage for employees. There are two types of temporary disability: total and partial. Total disability is when the employee is unable to perform any of their job functions. Partial disability is when the employee is able to do some work. The carrier will determine the correct payout based on the type of disability.
Employers and employees both benefit when disability insurance is offered in a comprehensive benefits package. Reasons are as follows:
There are two main types of disability insurance: short- and long-term. Let’s review some of the similarities and differences between them.
This is the most common type of supplemental insurance in which employees can choose to enroll. Short-term disability provides monetary payout at a percentage of the employee’s salary
. A waiting period will apply. The insurance carrier will assign a “case manager” to the claim who will then work with the employee to gather medical documentation, review the information and determine continued eligibility. STD payments will continue through a designated period and end if and when the employee returns to work. Qualifiers for STD payments include, but not limited to:
Long-term disability provides monetary payout (also at a portion of the employee’s salary) for individuals who have been temporarily disabled and exhausted STD term limits. There is no waiting period for a payout as long as the employee has been unable to perform any function of their job for six months. If an employee was also enrolled in short-term disability, there will be no disruption in payment.
Disability insurance will supplement a portion (anywhere from 45%-65%) of an employee’s salary if they are unable to report to work due to accident, illness, injury and/or disability. The most common use for short-term disability is maternity leave. Note, both forms of payment (STD & LTD) may be subject to taxes if the benefit is employer-paid. Please defer to your tax professional, payroll
department or HR/Benefits representative.
Employers should consider the following when offering disability insurance to offer their employees: