What is disability insurance?
Workers often have protections including life, health or property insurance. They also can enjoy workers' compensation coverage or other benefits, such as retirement packages. But none of these options address the loss of income that occurs when a person isn't able to work for a few weeks or months for temporary, non-work-related reasons. Disability insurance can prevent workers from experiencing unnecessary financial difficulty during these times. It can protect employees' quality of living and reduce the odds that they experience stress due to a lack of adequate income.
What are the benefits of disability insurance?
From the employer's standpoint, disability insurance can serve as a perk that helps with employee attraction and retention—individuals can get policies on their own outside of an employer, but doing so is more difficult and more expensive, so employees like having it as part of a benefits package. Disability insurance providers also help businesses monitor and rehabilitate workers to ensure they recover well, allowing business leaders to make better decisions about teams, projects and general productivity goals. Disability plans can therefore support the management of profit and loss.
What is state disability insurance?
State disability insurance is short-term disability coverage that a handful of state governments require employees to offer. The purpose of these requirements is to supplement gaps left by other forms of public assistance and insurance so that all employees have access to the benefits of short-term disability coverage.
State-run programs fund disability insurance in different ways. In some cases, employers pay the cost in full, but they also can share the expense with workers who are eligible for coverage. Many employers choose to work with private providers, but if businesses can prove they are financially capable, they can self-insure, too.
Most state-based programs that offer disability insurance provide benefits based on a percentage of an employee’s weekly pay, often 50%. They also can cap benefits at a certain dollar value. In New York, for example, the maximum weekly payout as of 2017 is $170. There are more options for employees now than there were in 1989. Today, many carriers offer enriched benefits coverage to bridge the gap and help employees who find themselves trying to survive on a disability benefits check make ends meet. And providing the extra coverage may just cost the same as what you are paying for basic statutory coverage. Policyholders can use the amount received for any usual expenses, such as food, housing or utilities.
State-run disability insurance programs are similar to Social Security Disability Insurance (SSDI), which is available on the federal level. State disability insurance is different, however, in that SSDI is intended for long-term support. Some people use state disability insurance to supplement SSDI or move to SSDI when they are no longer eligible for the state benefits.
What states offer disability insurance?
As of 2017, the states that require employers to provide disability insurance include:
- California (State Disability Insurance and Paid Family Leave)
- Hawaii (Hawaii Temporary Disability Insurance)
- New Jersey (New Jersey Temporary Disability Insurance)
- New York (New York Disability Benefits Law) See graphic
- Rhode Island (Rhode Island Temporary Disability Insurance)
- The commonwealth of Puerto Rico also provides coverage to residents (Puerto Rico Disability Insurance).
Clearly, state disability insurance is the exception rather than the rule. But according to a recent report from the National Safety Council, a disabling injury occurred outside of work once every 2 seconds in 2013. Employees won't be protected by workers' compensation coverage in these instances. Additionally, qualifying for long-term SSDI can be challenging, both because of the way disability is defined and because eligibility is determined in part by work history. For these reasons, more states might opt to mandate short-term disability coverage in the future.
AmTrust currently provides state disability coverage to more than 45,000 employees in New York and New Jersey. With competitive rates and agent compensation, we work to make the provision of state disability insurance easier than ever with quick access to online quotes, policy details, regulatory forms and more. If you are an employer in either of these states, you can simplify the insurance claim process for your employees by having AmTrust as both your state disability and workers' compensation carrier. Whether you have just a few employees or thousands, AmTrust can provide your business and people with 24-7 on- and off-the-job coverage.