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Disability Insurance: The Omitted Employee Benefit

You may have noticed the three letter code LTD on your paycheck next to a small dollar amount that is deducted every period. It stands for long-term disability insurance, and it pays to have it to help continue to provide for your family if you become injured or ill. Unfortunately, many employees go without it. Despite more and more employees offering long-term disability insurance as a benefit to their employees, the number of employees who opt-in is going down.

The Council for Disability Awareness, a group that represents 19 member insurance insurance companies, found this troubling trend in its latest review of claims data in 2013. Over 213,000 employers offer long-term disability through those companies, which is a slight increase from data collected in 2011. Yet the number of employees receiving the coverage declined approximately 1.5% to 32.1 million last year.  

Barry Lundquist, president of the council, cites a couple reasons for this change: primarily that employers are focused on compliance with the Affordable Care Act’s health insurance provisions, which causes employers to decide to deal with other benefits like disability later.

Additionally, employers only offer disability insurance as a voluntary benefit, meaning that the employee pays the full cost. Historically, the employer has paid for it, or paid a portion. In that case, the employees would be automatically enrolled. With voluntary plans, enrollment stagnates at about 40%, Lundquist says.

Likely due to the improving economy, the number of people receiving long-term disability payments declined for the second year in a row. Yet total claim payments increased by 1.6% to $9.8 billion in 2013.

If you do have disability insurance, it is important to determine what you do have and if it’s enough. A typical benefit would be 60% of your salary, up to a $5,000 monthly payout. Check if your employer allows you to buy more coverage (extra premiums can be really cheap). If your employer coverage isn’t enough, consider buying a personal policy.

Highest regards,