Protecting your most valuable asset
By David Bottoms, REBC, RHU, CLU, CHFC
Senior Vice President, Benefits
If you asked most Americans to name their most valuable asset, many would be quick to reference their homes, their cars or perhaps their bank account balance.
While it makes intuitive sense to reference a tangible item of value in response to the question, most would agree after prompting that our ability to earn an income is in fact our most valuable, long-term asset. Accordingly, one would think that Americans would be as vigilant about insuring their ability to earn an income as they are about insuring their homes, cars, computers and vacations. Sadly, this is not the case.
A recent survey of currently employed Americans by financial services company, OneAmerica, found that only 34 percent of those surveyed had disability insurance. The survey further found that, of those who indicated they do not have short or long term disability insurance, 43 percent indicated the reason was that their employer did not offer access to coverage.
Many employers cite disproportionate focus on the headline benefits of healthcare and retirement for their lack of disability coverage while others cite perceived high costs of providing the coverage as their reason.
However, the reality is that disability insurance is one of the most important and affordable components of an employee benefit plan.
Further, employer provision of group disability insurance enables employees to access coverage they desperately need, but are generally unable to affordably procure on their own. For instance, should an employee attempt to purchase individual disability insurance on their own, the underwriting hoops are numerous and the premium costs can be substantial.
Conversely, should an employer provide disability coverage to its employees via their benefit plan, the coverage is generally available to all employees regardless of health status and at a fraction of the cost of an individual policy given that group long term disability premium costs are often in the range of $20 to $30 per employee per month.
To be sure, individual disability insurance plans have a number of unique benefits and can provide great value; however, many individuals are unlikely or unable to purchase coverage on their own. As such, the provision of basic group disability coverage by an employer can be the difference between destitution and subsistence for a disabled employee.
Further, a group disability plan can shield employers from a sense of moral obligation to continue to pay an employee after they cease to be able to work following a disability. Not only does long-term salary continuance set up an uncomfortable conversation when the pay eventually has to stop, it also can create a dangerous precedent should future employees become disabled.
For the employer unable to pay for comprehensive disability insurance outright, options exist wherein a small base plan of coverage can be provided for all employees and then provided employees can be offered the chance to select supplemental coverage at their own cost. Also, for the employer unable to contribute any funds towards a disability plan, a number of options exist for completely employee-paid disability coverage.
To be sure, disability insurance contracts are some of the most complex in the benefits world so, for the employer who already provides coverage to employees but might be at a loss to explain the benefits, it is important to periodically review your plan to ensure monthly coverage limits remain sufficient, definitions in your contract remain market competitive and provided benefits and riders are relevant for your organization and its employees. For instance, in recent years, group disability benefit plan options have become more and more robust with features previously reserved for individual disability policies such as “own-occupation” definitions of disability, specialty occupation coverage, retirement savings benefit riders, inflation protection features, etc.
So, regardless of your organization’s disability insurance status, the new year affords a new opportunity for you to calibrate your coverage to ensure that your organizations most valuable asset – your employees — are provided the opportunity to insure theirs.