Protect Your Employees' Income
Protect Your Employees' Income
Apr 17, 2020
Is Disability Insurance Enough to Protect Your Employees' Income?
I recently read an article that suggested to consultants they should “pivot back to client companies and give them a closer look at whether they were doing enough to help all their employees protect their most valuable asset – their ability to earn income.” ¹
The article suggested consultants should think of the analysis “as a triangle with three essential points to make it complete":
- Savings and investments
- Life insurance
- Disability insurance” [Id.]
The crux of the article was to conclude that companies probably already make sure their employees have retirement accounts and life insurance but the article was encouraging sales of disability insurance to protect income.
Not so fast . . . .
Companies should not gloss over the idea that just because they likely have a savings and retirement account for employees, that means all is well.
Think of this scenario:
It’s a weekend. One of your employee’s 40 year-old water oak is dying. In addition, its’ branches are hanging over the neighbor house and one large branch fell on his roof last week. Your employee enlists the help of his neighbor and they decide to cut the tree down themselves. They are both in the tree, cutting branches. Your employee’s chain saw slips and cuts your employee’s ACL through his boot. And, cuts the branch the neighbor is standing on 20 feet in the air. The foot is bleeding profusely, and the branch breaks at the cut and the neighbor falls onto the gutter, cannot catch himself and hits the ground. He is not moving. In the mailbox is the cancellation notice of your employee’s homeowner’s policy, that was not paid.
After everyone is released from the hospital, you - the company, discuss what could have been different to help your employee? Obviously, your Company Disability Policy would have to pay your employee’s wages for the 6 months he was out of work.
What else could your Company have had in place for employees?
This is where many Company HR Managers and Benefit Managers do not see the impact of accidents, unexpected events, and emergencies on the value of an employee’s savings plan or retirement account. There are two more places your employee should have had protection in place.
First, because the homeowner’s policy lapsed, the employee could be sued for the damages the neighbor sustained in the fall. No homeowner’s policy means your employee could be personally liable for the damages the neighbor suffered if it was proven to be the employee’s fault.
Second, because the employee’s homeowner’s policy lapsed, the employee's savings account and retirement are likely going to get wiped out after a lawsuit or verdict.
Which is a bigger bill for your employee?
The lost wages of 6 months out of work? The disability insurance paying the 6 months of the $6,000/monthly salary (assuming 100% payment) - $36,000, makes up the deficit assuming full salary benefits. The employee suffers no loss because of HR's foresight in offering this benefit.
Or the combined amount of the unexpected neighbor lawsuit legal bill of at least $75,000, plus the damages the neighbor suffered falling 20 feet to the cement below, a likely $250,000?
The $36,000 disability policy payment is helpful while he recovers, but it is obvious the employee needs the $325,000 paid or disputed much more. In fact, by having a legal plan in place for about $17.00/month, paid by the employee, he could have had the entire $75,000 legal fee bill paid (covered under paid-in-full civil litigation benefit). And, if the legal plan lawyer was convincing to a jury, he/she could have convinced the jury that the accident was not your employee’s fault and saved some or all of the $325,000.
The disability payment was certainly awesome, but preserving your employee’s retirement account of some $325,000 for a small payment of $17.00 a month, would have made you a Rockstar Employer. Offering a legal plan can make a huge difference when unexpected or emergency issues arise.
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