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Blue @ Work

Round out your employee benefits

Because accidents happen.

Now more than ever, financial stability is heavy on the mind of many U.S. workers External Site.

The recent pandemic has delivered a stark reminder that bills and daily needs don't stop because someone can't work. Even before this trying time, 78 percent of U.S. workers were living paycheck to paycheck External Site. That's why now is the perfect time to think about rounding out your employees' benefits package with ancillary benefits like disability or accidental death and dismemberment (AD&D).

Adding disability and AD&D will give your employees the most important thing they need in the case of unexpected circumstances: Peace of mind. As an employer, you will have a powerful retention tool for current employees, and an easy, low-cost way to attract new employees.

Disability insurance should not be overlooked

When an employee misses a significant amount of work due to an injury or illness, employers are faced with many tough decisions. Can the employee cope with a potential loss of income? Can your business afford to fill the position? Disability insurance provides a way to replace the employee's income during this difficult time, allowing you to keep your business running smoothly despite an employee's absences.

There are two general categories of disability benefits: Short-term and long-term. Both guarantee a percentage of income to employees who must be absent from work due to an illness, accident or injury. A typical short-term disability benefit lasts between three to six months. Long-term disability External Site benefits can pay out for as little as two years, or for decades, depending on the type of policy. According to the Council for Disability Awareness, External Site the average individual disability claim lasts for a little under three years.

With both types of disability coverage, the illness or injury must be due to a non-work related injury or illness. Work-related injuries are typically covered by workers' compensation. It's a common misconception that disabilities only occur because of workplace accidents. In fact, the odds of becoming disabled before retirement are about 1 in 3, and most disabilities are caused by chronic conditions External Site such as arthritis and sciatica.

While some disability benefits are optional, others are mandated by law External Site. When employers offer disability insurance, they typically pay the full cost of coverage for most workers. Outside of five states (California, Hawaii, New Jersey, New York and Rhode Island), employers are not mandated to offer short-term disability plans to their employees. Many employees choose to offer the benefit and receive a federal tax deduction when they do.

In 2018, 42 percent of private industry workers had access to short-term disability insurance plans and 34 percent to long-term plans.

Source: U.S. Bureau of Labor Statistics, 2018 External Site

Short- and long-term disability can also be purchased individually through an insurance agent, if an employer group doesn't offer the benefit. However, this type of coverage is typically quite costly to purchase individually. External Site The average cost of disability insurance, External Site whether short term or long term, is 1 to 3 percent of an individual's annual gross income. This makes it an incredibly valuable benefit for workers who receive the coverage as an added benefit through their employer.

How AD&D can round out your benefits

Accidents happen in an instant, but the consequences last a lifetime. Accidental Death and Dismemberment (AD&D) External Site insurance gives your employees added financial security due to sudden, tragic circumstances.

What is accidental death? Accidental death under an AD&D policy means a death is caused by a circumstance unrelated to the body. So, it is not caused by an illness or the person's physical condition.

What is dismemberment? Dismemberment includes the loss — or the loss of use — of body parts or functions (e.g., limbs, speech, eyesight and hearing).

Usually, AD&D is included as a rider External Site to a health insurance or life insurance policy. Because AD&D insurance is limited and generally covers unlikely events, it is not a substitute for term life insurance External Site, which is intended for a death benefit External Site only. With AD&D, additional benefits are paid if a death or injury occur as the result of an accident.

What makes AD&D so valuable?

Most workers never consider buying more life insurance External Site once they sign up for employer-sponsored life insurance. What's more, 44 percent never change their coverage. With an AD&D policy, you are providing your employees with additional coverage in the event of unforeseen circumstances. Because the coverage is limited to accidents, rates for AD&D insurance External Site tend to be lower than rates for traditional life insurance, making it an inexpensive way to round out your employees' benefit package

AD&D insurance usually comes with coverage limitations External Site, so always read the fine print. For example, many AD&D insurance policies do not pay benefits if the insured dies during surgery, has a mental or physical illness, has a bacterial infection or dies as the result of a drug overdose. Also, the injury must be within a certain date of the accident. Again, this is why AD&D coverage is no substitute for life insurance. However, it can help in the case of an accident, where the extra financial benefit could be the safety net your employees need.

Unlock more tips and ideas about how to help your employees become financially secure. Visit Blue@Work more resources:

Questions? Contact your authorized Wellmark Blue Cross and Blue Shield account representative, or email us at Send Email today!