Group disability insurance: Five important things to understand

As witnessed from the recent economic downturn, the loss of retirement savings can be devastating — especially after years or, in some cases, decades spent building a sound retirement portfolio. Now, imagine losing your paycheck, too, as a result of a disabling accident or life threatening illness. Hard to fathom? It continues to happen to more Americans than you’d think.

Although the possibility of experiencing a disabling event cannot always be prevented, there are measures that employers can take to protect their employees and ensure that workforce productivity remains intact. Disability Insurance (DI) education and awareness is necessary to help bridge the gap between the need for income protection and the actual disability coverage (or lack thereof) many have in place. Here are five important things to understand about group DI and the value it provides.

• The odds are coverage will be needed. Just over 1 in 4 of today’s 20 year olds will become disabled before reaching age 67, according to the Social Security Administration. Given this statistic, many employees are not prepared to handle the costs of a disability and have not adequately prepared for it. Offering disability insurance protection is one way employers can help protect employees against these odds and ensure they return to work when ready.
• DI provides off-the-job coverage. Many falsely assume that worker’s compensation will provide the coverage needed in the event of a disabling injury or illness. It’s important to know that disability insurance can provide the income protection necessary for occurrences outside of the workplace, where many events can happen.
• DI helps protect employee paychecks and retirement plans. Many insurance providers offer retirement protection benefits that help employees continue to build their retirement savings even when a disability prevents them from earning an income. Additionally, some plans may allow the employee to have the benefit paid to the employer, for deposit in their employer-sponsored qualified plan or annuity account.
• Voluntary group DI helps employers cut costs. The shifting benefits landscape has opened a window of opportunity for employee-paid voluntary benefits, such as DI, as companies seek to control higher costs and move away from employer-funded benefits. Voluntary benefits allow employers to provide attractive benefit options at a competitive price while helping them keep their budgets in line.
• Benefits education is the key to success. Many employers offer disability protection, but employees may not know about or fully understand the benefit. In fact, in many cases, employer coverage is sufficient to meet income replacement needs of employees in the case of a disabling event. A number of insurance providers offer educational materials and interactive tools that will help benefits administrators communicate the value of DI among their employees, enhancing enrollment numbers and participation.

It remains clear that DI is a valuable income protection option for employees as they prepare for unexpected events and simultaneously protect their futures. Fully understanding and communicating the benefits of DI is critical when helping clients build a competitive and comprehensive benefits package.

Bob Risk is senior vice president of sales for Lincoln Financial’s Group Protection business.

Risk has 19 years of experience in the insurance industry and holds a Bachelor of Science degree in marketing from Indiana University.