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Optimizing the Benefits Safety Net: Supplemental, Life and Disability Plans Enrich Health Coverage

4 min read

Offering employees health care coverage is one of the most important decisions an employer can make. It provides peace of mind for employees and gives employers a competitive advantage in recruiting and retaining the top talent needed to succeed.

Even with health coverage, there are still copays, deductibles and additional costs that can add up. Ancillary coverage — supplemental, life and disability insurance — can help offset those costs. The additional coverage complements health plans, adding extra financial protection for employees. There are also supplemental plans that work hand in hand with health plans through integration by paying employees on their supplemental benefits when health benefits are paid. Ancillary coverage can be paid by the employer, the employee or a shared payment model.

Supplemental Benefits — Because the Unexpected Happens

Most Americans think being injured or disabled will never happen — but it can. Social Security Administration statistics say 1 in 4 of today’s 20-year-olds will become disabled before reaching age 67. Accidents, injuries and illnesses can happen anytime, and the costs associated withSenior female ceo and multicultural business people discussing company presentation at boardroom table. Diverse corporate team working together in modern meeting room office. Top view through glass an unexpected hospital stay can add up quickly.

Tom Davenport, senior director of product management at USAble Life, said, “We often underestimate how quickly expenses add up — from time missed at work and travel costs to deductibles and copays. In addition, a serious situation may reach the limits of an employee’s health coverage. The additional layer of financial protection helps when employees need it the most, and the cash benefits can be used for anything, allowing them to recuperate and recover.”

Supplemental insurance — accident, critical illness and hospital indemnity plans — is an affordable way for employers to offer additional coverage and financial security that goes beyond traditional health benefits.

“Supplemental benefits complement health coverage by covering additional expenses in the event of a covered accident, serious illness, or hospitalization,” Davenport said. This type of coverage provides employees with cash benefits to pay out-of-pocket costs for medical and nonmedical expenses. From copays and deductibles to travel and childcare, the choice is theirs.

More and more, employers are seeing the benefits of offering supplemental coverage, like accident insurance. This coverage is affordable, and in addition to paying benefits directly to employees, some plans may include a wellness benefit for covered preventive care — complementing health coverage.

Why Life Insurance Is Important

According to a 2021 study by The Life Insurance and Market Research Association (LIMRA), just 52% of those surveyed reported owning life insurance, down from 63% in 2011. The report also noted that 60% of Americans don’t buy life insurance because they think it’s too expensive. However, when you offer life insurance to your employees, they reap the benefits of group discounts, making it much more affordable.

Here are some reasons it’s important to have life insurance:

  1. Family security. If an individual supports a spouse, children or aging parents, they need life insurance. According to LIMRA, 42% of Americans say their household would face financial hardship within six months should a wage earner die unexpectedly — 25% would struggle financially within a month.
  2. Unanticipated expenses. Life insurance can help offset end-of-life expenses. Today’s average funeral costs are $7,000 to $10,000. Estate and inheritance taxes can also be expensive. Life insurance can pay for those costs, easing the burden on loved ones.
  3. Business security. If an individual is self-employed or has a family-owned business, a life insurance policy can help keep the business alive once that individual is gone — helping protect against the economic loss that could result from the death of the owner or key employee.
  4. Outstanding debts. If an individual has accumulated a large student loan debt or other substantial debts, a life insurance benefit can pay off those bills so their survivors aren’t saddled with that debt.

Two Types of Disability Insurance

Short term disability is designed to fill in the gaps caused by an illness or injury that keeps an employee out of work for several weeks up to six months. Long term disability insurance provides financial support or income replacement if recovering from an injury or illness keeps the employee from working longer than six months. The amount of coverage required depends on how much income needs to be replaced while the employee cannot work. Long term disability insurance benefits are, on average, about 60% of one’s pre-tax income. Short term disability benefits can kick in during the long-term disability waiting period, so there is no gap in protection. Disability insurance may be funded by the employer or by the employee on a voluntary basis.

“When I was diagnosed with a rare disease that caused severe illness, USAble Life was there for me with short term and long-term disability insurance,” Davenport said. “Without disability insurance for the year, I couldn’t work, and my family would have been overwhelmed financially. The paycheck protection of disability insurance is invaluable when employees need it.”

The Strategic Use of Benefits

A Society for Human Resource Management survey on the strategic use of benefits found that organizations that use benefits as a tool for recruiting and retaining talent reported better overall company performance and above-average effectiveness in recruitment and retention compared with organizations that did not.

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