Why Is Long-Term Disability Coverage More Vital Than Pet Insurance?

“It’s not going to happen to me.” Many employees’ attitudes regarding long-term disability insurance, which compensates a percentage of your salary if you are suddenly unable to work for a longer period due to illness, injury, or accident, may be explained by this sentiment.

Most people require disability insurance, according to 65% of respondents to a poll conducted this year by LIMRA, an association of financial services and insurance companies.

However, when questioned if they felt they required it, the proportion dropped to 48%. When people were asked if they had disability insurance, the percentage dropped to 20%.

Long-term disability insurance usually has a three to six months waiting period before benefits begin. If you have short-term disability insurance, it will cover you during that time. As many organizations begin their annual benefits registration season, disability coverage may be one option worth considering.

Some businesses may ask you to pay a higher percentage or perhaps the entire amount. If you employ the policy, this could have a hidden benefit afterward.

Alternatively, you may discover that your employer has enrolled you — or plans to enroll you — unless you opt out. An increasing number of employers are taking this approach to increase the coverage that they believe is in their employees’ best interests, as well as their own because insurers typically require a certain level of employee involvement to offer a plan.

Although long-term disability insurance lacks the novelty appeal of some other benefits offered by corporations these days (hello, pet insurance!), benefits consultants believe that it can be far more lucrative in the long run.

“This is an extremely important safety net benefit,” says Rich Fuerstenberg, a senior partner at Mercer, a human resources consulting firm.

Long-term disability insurance pays 50 percent to 60 percent of your income while you’re unable to work if you become disabled due to an accident, injury, or illness. Some policies pay until you reach the age of 65, while others pay until you reach the age of 65.

Many long-term disability claims are made for chronic illnesses like cancer and musculoskeletal disorders. According to the Council for Disability Awareness, the average length of a claim is over three years – 34.6 months.

Not everyone has enough money saved to get them through that period. For example, when the Federal Reserve Board polled Americans about household economics in 2015, 53% stated they don’t have a rainy day reserve that might last three months.

Worse, nearly half of respondents (46%) stated they wouldn’t be able to handle a hypothetical $400 emergency bill because they don’t have enough money. According to the Social Security Administration, one out of every four people under the age of 67 will become incapacitated.

According to LIMRA, 41% of businesses provide long-term disability insurance, with the proportion of larger employers offering it substantially higher. Premiums are a bargain compared to health insurance, costing an average of $256 per year for group policies in 2016, according to LIMRA. Many firms pay the entire bill or charge employees a nominal fee.

Long-term disability insurance is no exception, as businesses continue to push the expense of various benefits onto workers’ shoulders. They’re increasingly offering the coverage as an “optional” perk, which means employees are responsible for the entire cost.

The benefit is that if employees pay for their coverage using after-tax monies and become disabled and need to utilize it, the benefits will be tax-free.

“It’s better for an employee if they have the option of paying for coverage after taxes or voluntarily,” says Jackie Reinberg, national practice leader for absence, disability management, and life at benefits consultant Willis Towers Watson.

Some businesses may pay for a core basic benefit that replaces 40% or 50% of income, allowing workers to “upgrade” to a more generous income replacement of 60% or 70%.

Although there is a tax benefit to voluntary coverage, disability consultants are concerned that leaving it up to employees will increase the likelihood that they will forego long-term disability coverage. This is especially true if they have to choose between several other voluntary coverage options, such as cancer insurance, critical illness coverage, and, yes, pet insurance.

“These coverages all feel the same, and if you’re going to choose one at all, you tend to go with the cheapest and the one you think you’ll use,” says Carol Harnett, president of the Council for Disability Awareness, a membership group of disability insurers that focuses on disability education and outreach.

Auto-enrollment can have a significant impact. According to Mike Simonds, CEO of disability insurer Unum US, firms who auto-enroll employees in voluntary long-term disability plans may get 75 percent of employees to join, compared to 30 percent for employers who leave it entirely up to workers.

According to Fuerstenberg, if you weren’t offered long-term disability coverage when you were hired and didn’t sign up, it may be more difficult to do so during the open enrollment period.

Before being authorized, an increasing number of health plans demand employees present “proof of insurability,” which means they must answer a series of health-related questions. In addition, some long-term disability insurance may include pre-existing conditions, such as a one-year waiting period before receiving payments for a condition.

Need Long-Term Disability Coverage? Get In Touch With San Mateo Long-Term Disability Lawyer Today!

As essential as long-term disability insurance is, you don’t have to fight for it alone. Get adequate assistance from San Mateo Long Term Disability Lawyer today and get what is rightfully yours.


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