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Help Employees Understand the Value of Disability Insurance

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Almost everyone who buys a home or a new car doesn’t hesitate to buy insurance to cover any major expenses that are almost sure to come up.

If you view disability insurance (DI) as paycheck protection insurance, why is it that two thirds of working Americans report that they don’t have DI? Is it not offered by their employers? Or is it because they don’t understand the short- and long-term value of DI?

When faced with employees’ skepticism around DI, advisors should help them understand what DI does, breaking down their coverage options and the implications of each.

Many people think of disabilities as happening to someone else — either at birth or end of life, but the chances of an adult becoming disabled are higher than one might think; in fact, it will happen to just over one in four of today’s 20-year-olds before they retire, causing them to miss work for an extended period, and a paycheck. And, accidents aren’t the only cause of disability among adults; back injuries, cancer, heart disease and other illnesses cause the majority of long-term absences.

Once an understanding of the likelihood of a disability is established, providing a comprehensive overview so individuals understand the role that their employer-sponsored DI program plays in meeting their needs and how it strengthens their financial planning — whether or not they currently have a disability or medical condition — will lead to more employees opting for DI coverage. In turn, this will help employees feel more confident and secure about their financial future.

There are three ways to help employees understand their DI coverage.

Inform Employees About the Basics

First, it’s important that employees know the difference between short-term disability (STD) and long-term disability (LTD). They both provide income, but the benefits they deliver vary. For example, employees need to know that, generally, STD insurance covers periods of six weeks to six months, with premiums often paid by the employer; LTD benefits begin once STD is exhausted, and, in some cases, employers may offer a basic level of coverage either at no or limited cost.

Supplemental LTD coverage may be available to employees during enrollment, and there is also individual coverage that employees can purchase outside of the workplace. How the supplements interact with the basic level of coverage can be confusing, if not properly explained.

There is also a variety of voluntary benefits that offer coverage for more specific types of disabilities, including critical illness, hospitalization and accident insurance. These are usually paid for mostly by the employee and provide a one-time lump payment that the employee can use for expenses like health plan deductibles, utilities, transportation, etc.

And, for those who become disabled, they are often caregivers too, whose employment may be affected. For those adults who have a disability and are caregivers, this is a particularly important component of financial planning. Employees who are or will be caregivers should consider the ramifications if they experience an illness or injury. If they work, they will no longer have a paycheck to pay for the multiple expenses that accompany caregiving. They will also encounter even more expenses to replace the care that they usually provide for a loved one. DI can help supplement their much-needed income during that period.

Employees who have a disability may have a better understanding of how employment can be impacted by an illness or injury, but their pre-existing condition may make obtaining DI coverage too expensive or unobtainable. DI obtained through the workplace often is guaranteed issue or has simplified underwriting requirements, making it an accessible option for employees who have an existing health condition or disability.

These and a host of other considerations are important for employees to fully understand as they weigh their options around DI.

Provide Guidance on How to Access It

It’s understandable that some people will hesitate to sign up for DI if they don’t fully understand it. But, they also will be reluctant to sign up for coverage if they don’t know how or are afraid to access it.

The claims administration process can be complicated. Doctor’s input, subjective diagnoses, mental or behavioral health claims and recertification are just a few of the steps that employees need to know about and how to address them. Their health care providers play a critical role: An employee’s doctor must explicitly demonstrate how the clinical diagnosis of a disability impacts the ability to perform job responsibilities.

Communication is key: Having information about the process readily available prior to enrolling will make the employee feel more confident about the insurance option. Employers also may provide disability services team members to guide employees through what can be an uncertain time.

Important Last Step: Plan, Plan and Plan

Once employees understand the benefits of and how to access their DI coverage, they must communicate their available and purchased DI coverage with family members to be sure all plans are in place, in case of a disability. They can start by naming health care proxies and making sure those proxies are familiar with health care wishes. Employees also should consider establishing a power of attorney, custodial estate and/or take other legal steps to help navigate the claims process should their disability impact their ability to do so on their own.

Employees are encouraged to become familiar with all of the employee benefits and the provisions that can support them, if they become disabled — from Employee Assistance Programs to caregiver support services like Wellthy, or cancer support services like Access Hope. For example, employees who have disabilities also should know that if they are enrolled in their company’s pension or 401(k) plan, there may be a provision that accelerates vesting of their benefits, and certain tax rules allow early distribution of benefits without tax penalties.

Financial professionals need to be prepared to communicate the value of DI and have thoughtful, caring and holistic conversations with employees. Having knowledge and information about DI will empower people — those with disabilities, caregivers or people who simply want to protect their financial future — to sign up for the coverage that’s available to them.


Jessica Tuman is vice president of the Voya Cares Center of Excellence at Voya Financial. Voya Cares helps financial professionals and others understand, employ and better serve people with special needs and disabilities and their caregivers.

(Image: fizkes/Shutterstock)