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How To Buy Disability Insurance for Your Company
Insurance for Your Company
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Business New Haven
11/22/1999
By: Mitchell Young
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Sure, this is the “How-To” book, but before we talk about the “how” of disability insurance, we need to look at the “why.” Most business people wouldn't cross the street without life insurance to care for their families in the event of their untimely death.
For many people, a career-ending or -changing long-term disability is the elephant in the employer's outer office, a topic everyone would just as soon avoid.
Unfortunately, disability occurs far more often that we would like. According to industry surveys, disability strikes one in four workers before age 65. Seven out of ten people between the ages of 35 and 65 will suffer a disability that lasts three months or longer. And in 1997, there were 5,800,000 off-the-job accidents that resulted in disabling injuries. Heart disease and, of course, cancer can also result in disability.
The U.S. Social Security Administration has forecast that over the coming decade, the aging baby-boomer generation workforce will be the cause of a 37-percent increase in the incidence of disability.
The accident or illness that results in the long-term disability of an employee, senior manager or owner of a company will certainly devastate that person. But the impact on your company can also be substantial - in reduced morale alone.
When thinking disability, employers often think of workers compensation and Social Security as the safety net for the company and the employee. Unfortunately, the majority of disabilities occur off the job, and injuries that occur off the job are not covered by workers-compensation insurance.
Moreover, Social Security rejects a majority of initial applications for disability benefits. While many workers eventually will receive benefits, insurers assert that the average worker will likely receive only 30 to 40 percent of their pre-disability income.
For many years, disability insurance was marketed only to business owners and top management - and costs reflected that elite market. Today, many companies are discovering that attracting the employees they need is largely about benefits that bolster financial security. For high-quality workers, a complete core benefits package has become essential.
The tight labor market has pitted small and mid-sized companies against larger rivals for the best personnel, which only accelerates this trend. Industry experts and anecdotal evidence confirm it is “big-company” benefits that typically swings a highly qualified candidate away from a smaller and perhaps more exciting company to a larger and more “financially secure” one.
aThe prospect of a career-ending disability can be a disturbing prospect, and both employers and employees can feel far more confident with a disability program in place.
Of course, you can never be too rich, too thin or (many of our friends in the insurance industry might say) too well insured against potential risk. Unfortunately, most businesses must also weigh affordability when choosing benefits, especially new benefits.
The good news is that changes in how disability insurance is marketed have resulted in a far more affordable benefit than was previously the case. Disability insurance is now marketed as a group benefit. The resulting reduction in costs and the larger pool of insured have helped insurers reduce costs substantially to group buyers. That even includes companies with as few as two employees.
Disability Insurance CheckList:
• High AM Best Financial Rating
• Flexible Group Plans and Rates
• Liberal Underwriting Criteria
Disability insurance is a specialty product, so your choice of insurers should include a company that is committed to disabilit insurance. It's also important to choose a reliable firm with an excellent financial record. In the past, exposure in long-term disability caused problems for some insurers. While that is unlikely to reoccur, you want a company that not only can pay, but is eager to resolve problems.
As well, buy as a group. The savings, affordability and underwriting requirements are far more attractive with a group buy. Insurance marketers claim that costs will begin as low as ten dollars per month for companies with two to nine workers.
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