Disability Insurance

Key Takeaways

[Music] Let's take a look at disability insurance. Disability insurance replaces income for employees who become unable to work on a regular basis because of illness or injury. It covers both workrelated and non-workrelated conditions unlike workers compensation and is provided through contracts between employers and insurance companies. Employer sponsored disability insurance covers two main types. Short-term up to 6 months and long-term covering from 6 months to life with different definitions of disability. Historically, private disability insurance emerged in the late 1800s alongside industrialization, supplementing government programs like workers compensation and social security, which provide limited income replacement. Participation varies by employment status with higher rates among full-time workers and costs to employers averaging about $100 per employee for short-term and $80 per employee for long-term coverage annually. Short-term plans often exclude self-inflicted injuries, many mental illnesses and chemical dependencies, while long-term plans may transition from own occupation to any occupation definitions over time. Many long-term plans now include partial disability coverage, offering benefits for part-time work to reduce total claim costs. Funding methods include using insurance companies, partial self-funding with stop-loss insurance, or full self-funding with decisions based on group size and risk tolerance. Federal laws such as the Age Discrimination in Employment Act, the Americans with Disabilities Act, and Orisa influence disability plan design and offset provisions, coordinate benefits with public programs. Disability insurance replaces income for employees who become unable to work on a regular basis because of illness or injury. [Music]