Long-Term Disability Insurance: What Every Employer Needs to Know

Imagine one of your best employees suffers a serious injury or illness that keeps them out of work for months. While they focus on recovery, how will they pay their mortgage, support their family, or cover medical bills? Long-term disability insurance provides this crucial safety net, replacing a portion of their income when they can't work.

For Long Island business owners, understanding long-term disability (LTD) insurance isn't just about compliance—it's about protecting your team and strengthening your benefits package in a competitive job market.

What Is Long-Term Disability Insurance?

Long-term disability insurance replaces a percentage of an employee's income when they become unable to work due to illness or injury for an extended period. Think of it as income insurance—just like car insurance protects against vehicle damage, LTD insurance protects against the financial impact of losing earning ability.

Unlike short-term disability, which typically covers the first few months of inability to work, long-term disability kicks in after a waiting period and can provide benefits for years, sometimes until retirement age.

How Long-Term Disability Insurance Works

The process follows a straightforward pattern:

• Elimination Period: This is the waiting period before benefits begin, typically ranging from 90 to 180 days. During this time, employees might use short-term disability, sick leave, or other resources.
• Benefit Amount: LTD typically replaces 60-70% of an employee's pre-disability income. This percentage ensures meaningful financial support while encouraging return to work when possible.
• Benefit Duration: Coverage can last from a few years to until the employee reaches retirement age, depending on the policy terms and the nature of the disability.

The key distinction in LTD policies is between "own occupation" and "any occupation" coverage. Own occupation means employees receive benefits if they can't perform their specific job duties—crucial for specialized professionals like surgeons or attorneys. Any occupation coverage only pays benefits if the employee can't perform any job they're qualified for by education and experience.

Why Smart Employers Offer Long-Term Disability Insurance

For small to medium businesses on Long Island, LTD insurance serves multiple strategic purposes:

Recruitment and Retention: Professional employees, especially in medical practices, law firms, and accounting offices, expect comprehensive benefits. LTD insurance demonstrates that you value their long-term financial security, not just their immediate productivity.

Peace of Mind: When employees know they're protected against catastrophic income loss, they're less stressed and more focused. This translates to better performance and loyalty.

Competitive Advantage: Many small businesses skip LTD insurance due to cost concerns, but offering it sets you apart from competitors who only provide basic benefits.

Cost-Effective Coverage: Group LTD insurance is typically much more affordable than individual policies, making it an efficient way to provide valuable protection.

What Employees Gain from LTD Coverage

From your employees' perspective, long-term disability insurance solves a critical financial vulnerability. Most working professionals are just a few paychecks away from financial stress, even with savings.

LTD insurance means they can focus on recovery rather than financial survival if serious illness or injury strikes. For employees with families, mortgages, or other significant financial obligations, this protection is invaluable.

The coverage is particularly important for your higher-earning employees who have more income at risk and may find individual disability insurance prohibitively expensive.

Key Considerations When Setting Up LTD Insurance

Several factors affect how LTD insurance works for your business:

• Employer vs. Employee Premiums: Whether you pay premiums or employees pay affects the tax treatment of benefits. Each approach has advantages worth discussing with your benefits advisor.
• Integration with Other Benefits: LTD policies often coordinate with Social Security disability and workers' compensation to prevent over-insurance while maintaining appropriate coverage levels.
• Industry-Specific Needs: Professional practices may benefit from own occupation coverage, while other businesses might find any occupation coverage sufficient and more affordable.
• Participation Requirements: Most insurers require a minimum percentage of eligible employees to participate, making employee communication crucial.

How Benton Oakfield Simplifies LTD Insurance

Setting up long-term disability insurance involves numerous decisions about coverage levels, waiting periods, and policy features. At Benton Oakfield, we handle this complexity for Long Island businesses, ensuring you get coverage that fits your budget and meets your employees' needs.

We don't just set up the insurance and disappear. Our team explains the benefits to your employees so they understand and appreciate this protection. We also handle ongoing administration and serve as your advocate when claims arise.

Our experience with professional practices, nonprofits, and small businesses across Nassau and Suffolk Counties means we understand the specific challenges Long Island employers face. We can design an employee benefits package that includes LTD insurance as part of a comprehensive strategy to attract and retain quality staff.

Long-term disability insurance represents one of the most cost-effective ways to provide meaningful financial protection to your employees while strengthening your benefits package. In today's competitive job market, it's protection both you and your employees can't afford to skip.

Ready to explore how long-term disability insurance can benefit your business? Contact our team to discuss your specific needs and get a customized recommendation.

Compliance Note: Benefit plan rules and tax implications vary based on company size and location. This guide is for educational purposes only. Please contact your Benton Oakfield representative to discuss how this applies to your specific situation.

Photo by fauxels on Pexels