Disability Benefits

Disability benefits are payments that guarantee income when an employee cannot work because of sickness (physical or mental) or accident. The length of the disability and its cause are two key factors in determining the form of disability benefit that may apply.  Disability periods may be temporary or permanent and may result from an on-the-job accident or illness or may be totally unrelated to work.

Should you decide to offer disability benefits, here are some possible choices: 

Paid Sick Leave Benefits
Paid sick leave benefits are not required by law. Unpaid sick leave, however, may be legally required if you are subject to either federal or state family and medical leave laws. Sick leave, like other time-off benefits, is valuable to employees and, when combined with certain disability insurance benefits, can create an attractive package of benefits that make employees feel secure and valued. 

Short-term Disability Insurance
Short-term disability policies are private policies that you can buy for your employees. Short-term disability insurance is designed to provide income to employees who become disabled due to sickness or an accident and are unable to work after an initial waiting period (generally, one to seven days). Short-term benefits are usually expressed in terms of the maximum number of weeks that the plan will pay (the industry standard is 26 weeks). Government statistics show that these benefits typically replace about 50 percent to 67 percent of an employee's income.

How short is short-term? Benefits payment is usually expressed in terms of a maximum number of weeks (13, 26, or 52) of benefits for a single period of disability. While statistics show that most short-term disabilities last far less than 13 weeks, 26 weeks is the most common limitation on disability policies.

Long-term Disability Insurance
Long-term disability policies pick up where short-term policies leave off, covering employees who become disabled and are unable to work for longer periods of time (generally six months or longer). 

How long is long-term? Long-term disability insurance typically provides 50 percent to 60 percent of pay to disabled employees, which continues to retirement age or for a specified number of months, depending on the employee's age at the time of disability.  In most plans, benefits are paid for the duration of the disability up to the age of 65. Benefits are usually computed as a percentage of the employee's basic compensation prior to the disability. There is usually a maximum dollar amount per week or month.