Make Disability Income Benefits a Priority
By John C. Morris
Insurance, Benefits, Investments and Financial Planning: for
individuals, each of these areas can play an important role in the formulation
of a sound financial strategy. However, for professionals and business owners,
the area of Benefits often takes center stage because of its significant cost
to employers and its substantial benefit to employees.
In the Benefits area, one of the challenges faced in developing
a sound benefits program for business clients and professionals is how to provide
a comprehensive and effective program while maintaining cost efficiency for
the program as a whole. In order to accomplish this goal, the many (and sometimes
competing) benefit needs of the business or practice and its employees must
be taken into account.
The two most talked-about employee benefits are usually health
insurance and retirement plans, and while they are both important and integral
to a sound benefits plan there is another equally important yet often-overlooked
benefit: disability income (DI) insurance. In light of a 2001 study conducted
by the Consumer Federation of America and the American Council of Life Insurers,
which reported that “a large majority of U.S. workers, 82 percent, either
have no long-term disability income coverage, or coverage they believe is inadequate”,
it seems that neither individuals nor businesses are making disability income
insurance a priority.
Why is DI Insurance So Important?
The virtual elimination or significant reduction in income
that can result from an illness or injury can redirect the course of one’s
life and have far-reaching consequences for your family. All of a sudden, providing
life’s necessities (food, housing, clothing, etc.) could constrain your
ability to provide life’s niceties (a car, college for your children,
savings for retirement, etc.), and eliminate life’s luxuries (vacation,
travel, a second home, etc.).
Why do many companies not include DI insurance in their benefit
offerings? The answer obviously differs for each individual company; however,
the most common feedback suggests that the rising costs for health insurance
dominate benefits budgets and reduce the variety and value of other benefits
that can be offered. This is certainly a valid concern, though not an insurmountable
There are many different ways to structure employer-sponsored
DI insurance plans to make them efficient and affordable. They can either be
paid for entirely by the employer or the employee or some combination of the
two. No matter who pays the premiums, however, the overall cost of DI insurance
can be affected by any of several modifications to the program:
Reduce or extend the amount of time before one receives
Reduce or extend the length of time benefits are payable.
Raise or lower the amount of benefit that is payable
to the insured.
Include or eliminate additional optional benefits.
Devising a balanced Benefits program, including DI insurance,
can be challenging, but it is not impossible. It is important to prioritize
when choosing among the many types of benefits available, and DI insurance
should be right near the top when setting priorities for your employees’ benefits.
John C. Morris, CLTC, is an associate of FranklinMorris, Coordinating Broker
for the Bar Associations Insurance Agency, Inc. For more information on the insurance
benefits available to MSBA members, visit www.msba.org/departments/membership/baia/.