In the event of a disability, often times personal savings, loans, or spousal income do not provide sufficient financial resources to meet the necessities of daily life. Disability Insurance products ensure that employees will have a source of income to fall back on should they become disabled.
Typically, large groups offer a richer benefit plan than what the smaller groups offer, and they tend to have less cost sharing with employees for disability premium.
Employer-sponsored disability programs are usually comprised of the following three parts:
Sick leave plan: covers casual absences
Short term disability (STD) plan: pays for short term claims of up to 6 months, or sometimes even a full year
Long term disability (LTD) plan: provides salary replacement after the STD period, which is usually to age 65 and even beyond
Both short and long term Disability Insurance are available for employers to include in their employee benefits package. Long Term Disability Insurance provides financial assistance if an employee is unable to work for an extended period of time in the event they become totally disabled. This serves as a supplement to disability benefits available through government programs.
There are two categories of benefits payable under Long Term Disability Insurance:
Permanent Partial Disability – A monthly benefit based on average earnings is provided to the employee. This amount is also determined by the impairment of earning capacity and nature and the degree of the injury. The benefit may also pay out a lump sum for non-economic loss, such as a loss of enjoyment of life.
Permanent Total Disability – A monthly benefit is provided to the employee in the event that they will likely not recover from a work-related injury or sickness to the extent that he/she will not be able to work again.
Similarly, there are also two categories of benefits payable under Short Term Disability Insurance:
Temporary Partial Disability – An employee is considered partially disabled if he/she is unable to perform his/her regular job on a fulltime basis, but is able to work said job, or another job, on a partial basis. Weekly benefits are paid to the employee.
Temporary Total Disability – If an employee is temporarily disabled and cannot return to any type of work due to their work-related injury or sickness, they are provided weekly benefits to replace a portion of their earnings for as long as the disability lasts.
When claims are made, employees must provide medical evidence, including a prognosis outlining an estimated return-to-work date where possible.
If the employer contributes even $1 toward the LTD premiums, then the employees will be taxed on their LTD benefits.