Being a smart buyer of long-term disability insurance (LTD) for your company is about more than just up-front costs — it’s about providing income refuge for the employee and a compassionate and cost-effective path to separation for the employer while reducing liability. We’ll review key aspects of a well-crafted LTD plan, including getting the injured employee back to work. Do Your Homework When shopping for employer sponsored long-term disability insurance, you can learn a lot by researching a potential carrier’s return to work program. The best carriers recognize that it’s in everyone’s interest — the insured, the employer, and the insurance company itself — that the disabled employee returns to work. Claim data indicates that after 24 months of disability, most individuals are extremely unlikely to ever return to work. That’s not good for anyone. The question then becomes, what will your insurance carrier do to help you and your injured employee return to work well before the 24-month mark? Consider the following:
- A disabled employee attempting to return to work may require changes or improvements to the physical infrastructure in the workplace. Be sure to investigate if the installation of wheelchair ramps, special desks, or other specialized equipment is covered.
- How does the carrier treat the issue of partial disability? Some more traditional plans tend to provide a disincentive for certain return-to-work activities, such as trial work days. If an injured employee feels ready to come back to work two days a week, for instance, the insurance plan should support that effort. Likewise, the plan needs to include generous provisions that do not penalize the employee for failed early attempts at returning to work. It’s also important that the employee does not face a situation where he or she can collect more money by staying home than by returning to work.
Other Policy Provision Details to Review When it comes to taking a close look at your long-term disability policy, contractual details are very important. Take note of the following, often overlooked elements:
- Beware of “prudent person” clauses in the insurance contract, which broaden the definition of pre-existing conditions. This can result in a denial of coverage for the employee. These provisions limit carrier liability, but as the employer, you will still have the responsibility to accommodate your disabled employee.
- Define income carefully. It’s crucial that you include, for yourself and your employees, salary, commissions, bonuses, and any other forms of income that apply. Your sales staff, for instance, who are paid largely in commissions, or an executive paid mostly with bonuses will want that income covered.
- Own occupation (OWN OCC) protection. Most long-term plans offer 24 months of protection to the insured for injuries specific to his occupation; after that, to receive coverage, the person would have to be disabled from any forms of work (ANY OCC) not just in his or her occupation. Examine this type of clause closely because in many cases, a highly skilled worker who has invested many years in her occupational training (a surgeon, for instance) might need or want more than two years of OWN OCC protection.
Have questions about your company’s approach to long-term disability insurance? Would you like to learn more about how your company can approach more technical topics within long-term disability insurance, such as income offsets and tax advantages? Please feel free to contact me at jgreif@psafinancial.com.
