One of the most significant benefits a company can provide to its employees is protection against a potentially devastating loss of earning power due to a serious accident or a major illness. However, disability insurance is often overlooked, especially within a small group employer’s portfolio of benefits.
“That’s unfortunate because disability is perhaps the most important thing they should be focusing on,” says Clancy Merrill, executive director for small group sales and strategic alliances for The Guardian Life Insurance Company of America, which specializes in providing benefit coverage for small and midsize companies.
“I don’t want to downplay the importance of life, dental or medical insurance,” he adds. “But let’s face it, your greatest asset during your working career is your ability to get out of bed every day to go to work and earn an income.” The need for disability coverage is particularly acute at small firms, where the sudden absence of a single employee can significantly disrupt a company’s operations. For companies with 6 to 9 employees, the loss of one person to disability could amount to a 15%-to-20% reduction in an organization’s productivity. The impact is far less at a company with 100 employees.
New enhancement
To help plug this critical gap in coverage, Guardian has introduced guaranteed issue (GI) on long-term and short-term disability insurance for small group employers with 2 to 9 employees. Companies this size typically have a hard time accessing such policies, especially those that come with the GI enhancement. This is the first time Guardian has made such disability coverage available to small groups.
Under GI, all employees in a group are automatically covered for disabilities, and the requirement for prior medical examinations is waived. There are some limitations and exclusions in the first two years for pre-existing conditions. For groups of 6 to 9 lives, Guardian’s long-term disability insurance covers 60% of an employee’s salary up to $10,000 a month ($120,000 annually), for a maximum monthly benefit of $6,000. For groups with 2 to 5 lives, 60% of each employee’s monthly income up to $4,166 ($50,000 annually) is covered, amounting to a $2,500 benefit.
“By eliminating a number of process steps and industry norms, we’ve made it easier for brokers and small business employers to access a quality disability insurance product, one that offers virtually the same features and benefits that larger companies have access to,” says Merrill.
Dispelling myths
The critical need for income protection as a cornerstone of financial security doesn’t always sink in because of misconceptions about the nature and frequency of disabilities, or the feeling that “it can’t happen to me.”
The idea persists that disabilities are usually the result of freak accidents at the workplace. But the numbers paint a more ominous picture. More disabilities originate in public or at home than at work. And most long-term absences from the office are due to back injuries and the onset of debilitating illnesses like cancer, diabetes, and heart disease.
Overall, 51 million Americans (18% of the population), are classified as disabled, according to the U.S. Census Bureau. Three in 10 individuals entering the workforce today will become disabled before retirement, the Social Security Administration estimates. And there is a one-in-seven chance that a disability will last more than five years.
Many employers have the perception that workers’ compensation or other state-mandated disability insurance programs are good enough for their needs. What they fail to recognize is that workers’ comp only covers work related injuries and many mandated coverages have limited benefits and durations. Guardian’s disability coverage protects a worker every day for occupational or non-occupational disabilities.
While disability insurance does not cover 100% of lost income, it does cover a substantial portion of pre-disability income – permitting claimants to maintain a similar lifestyle and help meet their personal financial obligations. The alternative is to have no income replacement, and with no fallback, individuals are forced to deplete their savings and investments, rely on credit cards and even tap into their retirement accounts. It’s not surprising that disabilities are a major cause of home foreclosures and personal bankruptcies.
This latest small group enhancement underlines Guardian’s strong commitment to providing small group employers with access to large group benefits. Guardian has 60 sales representatives in three locations around the country that are focused exclusively on working with brokers to provide benefits to employers with 2 to 15 employees.
The new GI disability product aligns perfectly with Guardian’s existing GI small group life insurance policy. In addition, it provides brokers with dynamic tools to approach small employers with a complete and competitive portfolio of benefits.
“We have been able to recognize the need in the marketplace, develop solutions that fit small employers, and ultimately deliver another enhancement that reinforces our commitment to small businesses,” says Merrill.
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