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How Disability Insurance is Win-Win for Workers and Employers

Benefits of disability insurance

Employers don't want to lose good workers. Time spent recruiting, onboarding and training a new employee, plus the ramp-up time until a new hire can meet an experienced employee's productivity level, all add up to real money. Research shows that employee replacement costs can equal as much as 33% of an employee's annual salary.

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But employers also face tough decisions when employees can't work. If an employee is out of work due to an off-the-job injury or illness, what happens after they've used all their paid time off? Employers usually can't afford to continue paying people who aren't contributing to the bottom line. Something's got to give.

At the same time, employees don't want to lose good jobs. When an employee is recovering from an injury or illness, they've got plenty to worry about: their ongoing treatment and recovery, the added stress on their family, extra expenses for medical bills and new supplies or services they may require. The last thing they need is to learn that they won't be getting a paycheck for weeks – or months – until they can return to work.

This is where disability insurance comes in. Disability insurance can address the concerns of both the employer and the employee, by providing a monthly benefit until the employee can return to work. By offering disability insurance to employees during open enrollment, employers provide a safety net that helps to protect their employees' finances and their investment in their labor force.

How does disability insurance work?

Disability insurance regulations can vary from state to state. But in general terms, coverage provides a pre-determined monthly benefit payment for a set period of time, after a certain waiting period (often called an 'elimination period') has passed. Each of these variables – the benefit amount, the benefit period (or length of time benefits will be paid), and the elimination period – change from policy to policy.

For employer-sponsored group plans, the employer usually chooses the elimination period and the benefit period and sets a minimum and maximum amount for monthly benefits. During open enrollment, the employee can then select a monthly benefit amount within that range. The benefit amount cannot exceed 60% of the employee's regular monthly earnings, and also may be subject to other limits due to their state's disability income plans.

Elimination periods may be different for injuries vs. illnesses; for example, there may be no elimination period for an injury, but a disability caused by an illness may have an elimination period of seven days. In some cases, elimination periods may be as long as 180 days. And similarly, benefit periods can range from three months to two years.

Other things to look for

Employers can also choose to add optional riders and coverage for disability caused by other factors. For example, coverage for time away from work for mental and nervous disorder treatment may be added. Optional riders may include coverage for doula services, Family and Medical Leave Act (FMLA) time, on-the-job accidents, and premium refunds if they are laid off.

Employers can also choose to contribute a set dollar amount or a percentage to each employee's total monthly premium to reduce employee costs. As with most group products, employees receive better rates than they would with individual coverage, and their premium payments are conveniently payroll deducted.

Group Voluntary Disability Income from Allstate Benefits

Allstate Benefits offers Group Voluntary Disability Income insurance to employers with a variety of flexible options to meet the needs of the business and its employees. Learn more about disability insurance from Allstate Benefits.

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