COLUMBUS, Ohio, June 6, 2016 — Whatever the average income of your company’s employees, financial safety nets are a concern for anyone with financial responsibilities: a mortgage, a family, college tuition or just putting food on the table for kids and a spouse. Companies usually pay employees what is affordable and what the market demands, so there is no spare cash to pass on to them in the case of financial hardship.
Assuming that an employee is not laid off, one of the primary reasons a worker encounters severe financial struggles is that he or she is unable to work due to a disability. What can a company do for its employees to help them build a financial safety net that is affordable for both the company and the employees?
1. Offer disability insurance as an employee-paid, voluntary benefit
According to the Social Security Administration, the actual odds of a worker being disabled for at least six months is 33 percent. What if one-third of your workforce lost its homes, cars and the ability to live independently, while falling into serious debt because they were unable to work? Since nearly 91 percent of disabilities are caused by illness or health conditions, they are not covered by workers’ compensation. This also means that individuals who believe they are least able to afford disability insurance are the ones who need it most.
By offering disability insurance to employees as a voluntary benefit, a company can pass on all or some of the cost to the employee. If the benefit amount is selected as a reasonable dollar amount – one that would simply cover the least amount of replacement income truly needed – the monthly payment for this benefit should range between $20 and $50, depending on the carrier. That amount may be entirely payroll deducted, partially paid for by the employer, or offered as a paid benefit.
Colonial Life, one of the nation’s leading voluntary benefits carriers, explains that disability insurance is perhaps the most important voluntary benefit that any company can offer its employees. Disability insurance makes sure a worker does not lose everything he or she has if or when a period of disability occurs. In most cases, disability insurance is affordable enough that the employee can cover the cost when the employer offers the benefit at work.
2. Offer life insurance as an employer-paid, voluntary benefit
In a LIMRA study, 34 percent of employees said they would immediately have trouble meeting everyday expenses if an individual or family income earner died. Life insurance is also able to fill in some of the gaps that health insurance does not cover, such as long-term care expenses, according to Colonial Life. In addition, depending on the size of the group and participation, guaranteed policy issue may be possible. This is especially attractive for those who may be otherwise turned down for life insurance. Coverage for terminal illness is available, referred to as an accelerated death benefit, and the policy may be portable for the employee as well.
Life insurance may also be used in some creative ways. An executive 162 bonus program provides what is somewhat similar to a line of credit to a valued employee at a very low cost to the employer. There are various ways to establish these programs, and they can be extraordinarily helpful to an exceptional employee the company wishes to recruit or retain.
In addition, life insurance should be considered for all key employees, partners, owners, members of the board, and other integral people who, if they were to suddenly pass away, would leave a void within the organization. The policy’s proceeds will not replace the person, of course, but will provide a stream of cash to cover some of the resulting losses and to find, train and development the person’s replacement.
For more information on these two suggestions, see Colonial Life’s 2011 white paper on how both disability and life insurance may prove to be very useful voluntary benefits. Regardless of the income range involved, every worker needs to have both types of policies to help plan for what is not entirely unlikely but could be incredibly detrimental.
Instead of allowing financial difficulties to prevent an employee from coming to work or even focusing well on the job, an organization’s leadership should consider these two no-cost or low-cost ideas as key elements in building a financial safety net for their company’s employees.
 The Disability Guide: CDA 2010 Consumer Disability Awareness Survey. (2010, March). Council for Disability Awareness.
 Retzloff, C. (2011). Trillion Dollar Baby – Growing Up. LIMRA.
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