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Disability coverage – answers to 5 common employer objections
By: Willow Munro | Tuesday November 12, 2024
Having disability coverage can be a great relief for your employees’ financial health. Forty-three percent of Canadians are financially stressed, and suddenly being unable to make an income could have devastating consequences. This blog will go over common objections to providing disability coverage and explain how they can be overcome or mitigated.
5 common objections to disability coverage
1. Cost concerns
Disability insurance is another expense that your business can barely afford. Furthermore, the costs can be higher for those in high-risk industries like construction or medicine.
However, the cost of not having disability coverage could mean losing out on top talent. For employees it can cost even more – in worse cases even leading to homelessness.
What’s more, employee benefits are a tax-deductible expense for your business. Plus, if you were to provide your employees with a $10/month raise as opposed to paying $10/month in long-term disability (LTD) premiums, your employees would have to pay taxes on that amount. You can even add the coverage to your total compensation package to show the value.
FREE INFOSHEET DOWNLOAD: Benefits vs. pay raises (PDF: 106KB)
Finally, if your employees pay the premiums, the benefit itself is tax free. This set-up is quite common, and provides employees with a larger benefit should it be necessary to make a claim.
2. Administrative complexity
Offering disability coverage used to be quite complicated. However, the complexity of managing disability insurance nowadays is far less than it once was, with streamlined enrollment and case management services, even submitting a claim is easier.
Since employees prefer their medical information be kept confidential from their employer, the insurer and/or third-party administrator handles all the details. If you already have employee benefits, there would not really be a difference since you would be enrolling employees already. Disability case managers help with communication between a disabled employee, the insurer, and the employer. They help all parties navigate the process with ease, so administrative work is minimized.
How Disability Management Fast-tracks Employee Health & Return to Work
3. Perceived low demand
Some industries may seem to be at lower risk than others. For example, someone who works in an office versus someone who works at a wood mill. A company with younger employees may also believe their employees might not utilize disability insurance.
Nevertheless, even office workers can develop chronic pain or musculoskeletal issues from the sedentary nature of their job; young employees can still have accidents; and all employees can potentially have or develop mental health issues. In any of these scenarios, having disability coverage could be crucial.
4. Existing coverage
Most full-time Canadian employees working for an employer have access to Employment Insurance (EI), which covers them if they are injured or become ill (among other reasons). With that in place, it may seem unnecessary to provide disability coverage.
The caveat is that EI provides just 55% of earnings, versus between 70%-90% with disability coverage. What’s more, even if the disability lasts for more than six months, EI benefits cease.
Many employers choose to provide LTD coverage that usually doesn’t kick in for six months, and forego short-term disability (STD), which is somewhat covered by EI.
Something for employers to note is that certain STD plans can provide you with a discount on EI premiums paid by the employer. Speak with your knowledgeable benefits advisor for more information.
5. Concerns about claims
Disability claims can be somewhat complex and unpredictable in length. Meaning that some claims could end up paying out large sums of money for the benefit over time. This in turn could cause increased premiums.
While this is technically true, most employers in Canada wouldn’t need to worry about one claim affecting their rates significantly. This is because disability insurance is a pooled benefit for small- and medium-sized companies – which represent 98% of Canadian businesses.
Pooled benefits are usually benefits where the risk of a claim is low, but the benefit amount is high in comparison. The covered people are grouped together so that if a claim is paid, it has a small effect. Like a drop of water in a lake as opposed to a thimble.
Group Benefits Pooling Explained [FREE Infosheet and Infographic Downloads]
Many employers find that offering disability coverage can enhance employee happiness and peace of mind. This in turn helps with attraction and retention and reduced absenteeism. Ultimately, this works towards fostering a supportive and productive work environment.
Looking for more ways to help your employees feel financially secure?
How to Build a Healthy Workplace by Focusing on Financial Wellness
