Running a small business comes with its challenges and rewards. As a small business owner, employees are the backbone of success, and their well-being is essential to thrive. One way to support employees while protecting a business is by offering disability insurance.
Disability is an aspect of life that affects 28% of adults in Illinois 
. It refers to any physical or mental condition that hinders a person’s ability to perform daily activities or engage in gainful employment, such as accidents or illnesses. Whether temporary or long-lasting, disabilities impact individuals and their families, leading to emotional, financial, and social challenges.
We will dive into the importance of distinguishing between short-term disability (STD) and long-term disability (LTD) and how it complements health insurance. We will also explore the benefits of providing disability insurance to employees and how it enhances the overall stability of a business.
As the name suggests, short-term disability insurance provides coverage for a limited time for individuals who are temporarily unable to work due to injury or illness. Depending on the disability policy, STD insurance offers income replacement ranging from 40-70% of pre-disability income during a set benefits period, typically ranging from three to six months. The elimination/waiting period before receiving these benefits can vary, ranging from a week to a month.
Common scenarios where STD insurance is beneficial include surgery recoveries, short-term illnesses, pregnancy/maternity leave, or accidents resulting in temporary disabilities. It provides peace of mind during these challenging periods, allowing individuals to recuperate fully before returning to work without the worry of how they will afford to take care of themselves.
Unlike STD insurance, long-term disability insurance offers coverage for an extended period and is designed to support individuals who face prolonged disabilities. Depending on the chosen policy, the benefits period for LTD insurance can range from a few years up to retirement, and an individual typically must meet the definition of disability for 90 - 180 days before they are eligible to receive benefits (waiting period). The benefit amount is similar to STD, where 60-80% of pre-disability income is replaced .
Long-term disability insurance acts as a lifeline for individuals facing severe and long-lasting disabilities. In cases where individuals are unable to return to their previous occupation, LTD insurance can provide a measure of financial security. Coverage is invaluable in ensuring that individuals and their families can maintain a stable standard of living, even in the face of life-altering events.
Distinguishing between STD and LTD is vital as each serves a specific purpose. While they share a common goal of income replacement during a period of inability to work, their durations and disability benefits differ significantly. It is essential to assess individual needs and financial goals when selecting the appropriate type of insurance and determining eligibility. Without distinguishing between the two types, individuals may face gaps in coverage during specific disabling events.
In addition, disability insurance can connect to life insurance, especially for those facing long-term injuries or illnesses. While disability insurance protects against lost income during a disabling event, life insurance can provide financial security to loved ones in the event of an individual’s passing.
We’ve already established why health insurance is important to employees, but where does disability coverage factor in? Offering disability insurance to employees comes with several advantages that contribute to the overall stability of a business:
Ultimately, the provision of disability insurance creates a stable and resilient work environment, contributing to a positive company culture.
Having both health and disability insurance is essential for comprehensive financial protection. Health insurance covers medical expenses, ensuring individuals receive necessary treatments without incurring excessive costs. On the other hand, disability insurance safeguards against lost income during periods of temporary or permanent disability. The two forms of insurance work in tandem, providing a safety net around physical health and financial well-being.
As a small business owner, providing disability insurance to employees is a winning situation. By offering short and long-term disability plans, employee financial protection is safeguarded during times of uncertainty, and a supportive framework is built to help retain top talent. We encourage everyone to explore their options, compare insurance policies, calculate premiums, and select coverage that best aligns with their unique circumstances. Being well-prepared and informed can make a significant difference in securing a stable and prosperous future for employees and businesses alike.
Starting in September 2023, Blue Cross and Blue Shield of Illinois will offer short-term and long-term disability plans to small business owners designed to complement existing medical coverage. Still not medically insured? Learn about the information needed to apply!
