With long-term disability insurance, employees can be sure they have the necessary protection should something go wrong. Although many employees have a sense of invulnerability, disabling conditions are more common than death, but LTDI at least gives affected employees some sort of income when working is not an option, says Lenny Sanicola, senior practice leader of benefits at WorldatWork.
"Having LTD coverage is important to protect one's income and have a sense of financial security for oneself and one's family," Sanicola says. "Lengthy periods of disability can be financially devastating to workers and their families. LTD coverage provides protection against that risk of becoming sick or injured and unable to work for an extended period of time."
Many employers have traditionally paid the full cost of LTDI, but that has been changing in favor of a new trend, Sanicola says. Instead, including LTDI in the voluntary benefits package is becoming more popular. By offering LTDI as a voluntary benefit, employees can still elect coverage, but it allows employers to shift the cost to the employees.
Recommended For You
"Depending on which option is chosen, there may be different costs and tax implications to the employee," Sanicola says. "Some employers may offer a 'buy up,' or supplemental program through a voluntary benefits menu, in which case the employee would pay the entire premium via payroll deduction. Some organizations may only offer LTD coverage through a voluntary benefits program; employees may be willing to purchase in this way due to the favorable group rates its employer is able to secure."
Among the employees who typically purchase LTDI coverage are the higher-wage workers, says Jason Carney, director of human resources at WorkSmart Systems Inc. LTDI is seen as a type of insurance that provides an extra layer of financial security, and many higher-wage workers are willing to put in that investment; however, lower-wage workers are more likely to save that extra expense.
"Long-term disability insurance is a safety net, and, in this economy, some folks in the lower end of the spectrum aren't so worried about safety nets," Carney says. "They'd rather save the money and the expense, but we've seen an increase among folks who make higher wages because it's an uncertain economy, and it's the ultimate safety net."
Older employees who are nearing age 65 are less likely to purchase LTDI, as well, Carney adds. More employees are behind in their retirement savings, and, as they are approaching age 65, some would rather spend this money elsewhere. Premiums also increase each year, and the benefit period reduces as employees age.
"Most LTDI policies only go to age 65, so if I'm 62 years old, whether I've postponed my retirement or not, I'm faced with a higher premium because it's age based," Carney says. "The policy would really only be for a three-year period, anyway, so it's less attractive at that age."
For employers that offer LTDI, tracking and understanding the tax impact of premiums and claims as well as coordinating with state and federal disability programs can be the biggest challenges, Sanicola says. Employers should ensure policies and procedures are clear, disability claims issues are well-documented, and requirements for eligibility and claim processing are understood.
"Typically, with LTD programs, they are fully insured through an insurance provider, so it is important to work with this provider to make sure processes and procedures are clear to all parties, and appropriate and timely communications with the employees and/or claimants and medical providers are clear," Sanicola says.
When planning for the future, LTDI is a definitely a benefit employers should consider, Carney says. Remaining competitive in today's market can be challenging, but by offering a full range of benefits, including LTDI, employers can attract and retain the most talented employees.
"Long-term disability insurance continues to be a great benefit, and the more you can offer it, regardless of how your group perceives it, the better off you'll be," Carney says. "As the economy improves, companies will need to be more competitive, so I encourage anybody to continue offering a full range of benefits, including long-term disability insurance. The more you can offer, whether it's a group or an individual product, the more competitive you'll be as we get out of this economic mess."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
