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‘Paycheck insurance’ an often overlooked benefit

Nobody likes to think about becoming disabled, but one of every three workers over the age of 30 will miss at least three months of work during their careers, many without the benefit of “paycheck insurance,” according to a recent survey by America’s Health Insurance Plans.

“We’ll buy insurance for life, home, boat and auto, but hardly anyone thinks about insuring their paycheck with disability insurance,” said Pam Gregory, an employee benefits specialist with The Bottrell Insurance Agency of Jackson. “It’s relatively inexpensive, and helps retain employees.”

According to the U.S. Census Bureau, American workers of all ages have a one-in-five chance of becoming disabled at some point in their working lives. The American Council of Life Insurers reported that a person age 35 or older is six times more likely to become disabled than die before reaching the age of 65. Becoming disabled can prompt devastating financial results and few people have sufficient savings to tide them over for an extended period of time.

Think you have it? Better check

A troublesome trend concerns employees who believe they have disability insurance in their benefits package, but don’t. America’s Health Insurance Plans reported that 58% of those surveyed believed they were covered by disability insurance, but only one-third of employees actually have that safety net.

“Disability insurance is an income-replacement plan for your employees, and it’s a perfect opportunity on a group basis for an employer to have a program in place so employees have some type of assurance that if they go out on a short-term disability, a pregnancy for example, or long-term, such as an extended illness or injury, they’ll still get a paycheck,” said Gregory.

At an annual cost of roughly $200, disability insurance is one of the most affordable employee benefits available, compared to the average annual cost of family medical insurance of nearly $10,000.

“It’s very reasonable, and many companies offer it as an add-on supplemental benefit like cancer plans that companies can choose to pay for, or pay a portion,” said Ken Barlow, president of The DelKen Group, a human resources firm in Ridgeland.

Short-term disability insurance is often purchased on a 13-week, 26-week or 52-week basis, with varying elimination periods (the time between filing a claim and receiving monies). Long-term disability plans generally have a 90-day elimination period. Policies generally pay between 50% and 70% of an employee’s salary during the time they are absent from work. Some disability policies even pay benefits for partial disability.

“If an employer wanted to lessen the financial burden or cost to the company, they could opt for longer elimination periods, such as six months, and allow employees to buy short-term disability plans that would butt up against the long-term elimination period,” said Gregory. “Many people don’t realize that if employees buy the disability policy, it’s a tax-free benefit.”

Billy Sims, vice president of human resources for Jackson-based Southern Farm Bureau Life Insurance Company, said he’s had to place several employees on disability, and has seen first-hand the substantial benefit the “paycheck insurance” is for employees.

“If you ever need it, you appreciate it, but most people don’t think they’ll ever need it so they don’t put the value on it they should,” he said.

Barlow said more employers are adding such benefits to their portfolio to help attract quality employees.

“Employees today are more concerned about benefits than about pay,” he said. “They want to be paid a fair wage, but they also want a strong benefits package to go with it because we’re a leisure-type society. We want vacation time and all these things, but we’re also a society that wants to protect our family with a good income. As a result, employees like the idea of being secure with a disability program if they become disabled.”

Contact MBJ contributing writer Lynne W. Jeter at lwjeter@yahoo.com.


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