Brokers: How Disability Insurance Supports Workplace Equity

Quick look: Short- or long-term disability shines a spotlight on how employees may face dramatically different outcomes in the event of injury or illness. As a broker, you can help your small- and medium-sized business (SMB) clients offer this crucial benefit to staff, either through additional coverage or as part of a PEO partnership, as a means of protecting all workers in the event of a serious health-related event.

Throughout the past two years, the conversation around social inequities has moved to the foreground. The push for social change is causing businesses to look inward, evaluating their policies and practices to root out conscious and unconscious bias.

But creating a more level playing field for employees involves areas that may not be immediately obvious to business leadership. Becoming unable to work impacts employees differently. Lack of coverage for disability—whether short- or long-term—can have devastating consequences on an employee and those depending on their income for support.

As a broker, you can help your small- and medium-sized business (SMB) clients protect employees against the negative financial impact of illness or injury by helping them acquire appropriate disability coverage.

Disability can happen at any time

Most accidents, illnesses, or other work-impacting physical conditions happen with little to no warning. According to the Council for Disability Awareness, the most common reasons for short-term disability claims are:

• Pregnancies
• Musculoskeletal disorders (back and spine, knees, hips, shoulders, etc.)
• Physical injuries (ex. fractures, sprains, and muscle/ligament strains)
• Digestive disorders
• Mental health issues

The most common reasons for long-term disability claims are:

• Musculoskeletal disorders
• Cancer
• Physical injuries (ex. fractures, sprains, and muscle/ligament strains)
• Mental health issues
• Circulatory issues (heart attack, stroke)

In short, workers are not expecting to become disabled—and many are unprepared financially. Inadequate emergency savings, high costs associated with treatment, and fewer employers offering disability coverage can quickly cause serious financial setbacks for workers. 

Short-term and long-term disability plans

According to the American Council of Life Insurers (ACLI), 51 million Americans lack adequate disability insurance coverage. That means if they are unable to work due to illness, injury, or pregnancy their income will likely take a dramatic hit.

While nearly every state requires employers to maintain Workers’ Compensation coverage for work-related injury or illness that happens on-site or due to business operations, some states require employers to provide disability coverage for off-the-job injury or illness. In New York, for example, employers can collect contributions from employees for this benefit. Employers in Pennsylvania, however, face no such mandate.

Right now, there are no laws in place requiring employers to offer long-term disability insurance, which usually covers about 60% of the worker’s salary. However, about 50% of mid-size and large employers currently offer long-term disability coverage. Larger companies have greater resources to dedicate to supporting employees through this valuable benefit.

Every benefit matters

SMB employers may not be giving disability insurance enough thought. Many smaller employers are closing the gap between their larger counterparts through flexible work schedules, hybrid working environments, and other “soft benefits.” However, in a highly competitive market for top talent, workers are closely comparing benefit offerings before committing to a new position. SMB employers are at a disadvantage if they fail to offer disability coverage.

Encourage employers to update PTO policies

Adequate disability coverage is about more than just the insurance policy. SMB employers must consider how their company policies encourage (or discourage) employees to prioritize their health.

Many workers are unwilling to forgo the half-day pay or loss vital hourly wages, so they postpone important check-ups or preventative care due to a lack of paid time off.

Failure to include paid time off for wellness may put employees at risk for more serious consequences down the line. From an employer’s perspective, creating PTO allowances for healthcare is not only a way to demonstrate they care, it makes good financial sense, too. Protecting employees against long-term illness or helping them recover quickly from a short-term ailment brings them back to full productivity sooner.

A PEO partnership can help

Your SMB clients may not have the bandwidth or resources to update their PTO policies, which is where working with a reputable professional employer organization (PEO) like ExtensisHR can help. The HR professionals at a PEO help SMB employers craft comprehensive, compliant policies for paid time off, as well as all other HR operations like hiring, recruiting, learning & development, career pathing, and more.  

In addition to HR management support, SMB employers also gain a significant pricing advantage for healthcare and other insurance coverages. Coming under a PEO’s umbrella plan gives smaller employers access to large group pricing savings they would not otherwise be able to achieve.

Brokers can support positive change

HR professionals are dedicated to maintaining equitable, ethical work environments for employees. When a serious event happens with the potential to remove an employee from the workforce—either temporarily or long-term—inequities are quickly revealed.

Workers lacking appropriate encouragement from employers to take time off for check-ups may postpone important treatment that could cause more serious long-term effects. Employees without adequate emergency savings plans or those with only a single household income could face disastrous financial outcomes.

Brokers can assist by providing HR teams and SMB leadership with insight and information to help them support their staff in ways that may have been overlooked in the past. Disability insurance is one area many employers may not be thinking about but can have a profoundly positive impact on workers in the event of a claim.

Whether you use your position as a broker to provide coverage options to your clients or urge them to partner with a PEO, your clients will value your contribution in helping them protect their employees against the unexpected.

Contact ExtensisHR today to learn how our broker-centric structure helps you serve SMBs better while protecting your client relationships.