How Disability Insurance for Businesses Can Protect Your Team and Workplace

As a small business owner, keeping your team safe and supported is of utmost importance. You might already provide health insurance or a 401(k), but disability insurance for businesses is another vital benefit worth considering. It helps protect your employees and your business in the event of an unexpected illness or injury.

Providing disability insurance demonstrates to your employees that you value their well-being. It also helps keep your business stable and operations running smoothly. Let's break down what disability insurance for business owners is, why it matters, the types of coverage available, and the benefits it can bring.

What is Disability Insurance?

Disability insurance is a type of insurance that replaces a portion of an employee’s income when they're unable to work due to illness or injury. It differs from small group or large group health insurance, which covers medical expenses. With health and disability insurance, employees can focus on recovery, knowing they’re covered for both medical care and living expenses.

For small business owners, this type of protection means greater stability. When employees feel confident in their financial security, they can focus on getting well instead of worrying about bills. This peace of mind often leads to higher morale, increased engagement, improved productivity, and stronger employee retention.

Types of Disability Insurance for Business Owners

There are two main types of disability insurance to consider: short-term disability insurance and long-term disability insurance. Each serves different needs. The right mix depends on your company's size and budget. You should also base it on your workforce needs. Let's explore below a breakdown of each type.

Short-Term Disability Insurance

Short-term disability insurance provides income replacement for shorter periods of time. It often lasts between three and six months. Employees can use it for maternity leave, recovery from surgery, temporary conditions such as a broken bone, or a short-term illness. You may offer it in two forms:

• Voluntary Short Term Disability Insurance: Employees can choose to opt in and pay the premiums, which you deduct from their paychecks after taxes

• Employer-Paid (Non-Contributory) Short Term Disability Insurance: You pay for the premiums and automatically extend coverage to employees who are eligible for benefits

Statutory disability insurance is mandatory in some states, providing employees with basic short-term income protection regardless of extra coverage. 

Long-Term Disability (LTD) Insurance

Long-term disability insurance often begins where short-term coverage ends. It covers extended leaves of absence, which can last for years or even up to retirement age. This type of disability insurance for businesses can help you reduce the financial stress caused by long-term absences. Employees may use it for conditions such as cancer, major injuries, chronic illnesses, or permanent disabilities. Akin to short-term disability insurance, you can provide long-term disability insurance in two ways:

• Voluntary LTD Insurance: Employees choose to enroll and pay the premium themselves, giving them protection without increasing your costs

• Employer-Paid (Non-Contributory) LTD Insurance: As a business owner, you cover the premium, which can enhance benefits offerings and help retain employees while providing long-term security

Benefits of Offering Disability Insurance to Employees

Disability insurance for businesses can protect paychecks. It can also build a resilient workforce and a positive company culture. Here's how:

• Financial Protection: Your employees know that if something unexpected happens, they’ll still have income to cover daily expenses. This support can make a difference during recovery

• Recruitment and Retention: A competitive benefits package helps attract talent and reduce turnover. Disability insurance shows prospective hires that your company prioritizes their well-being

• Reduced Stress: Employees can recover with peace of mind when they don’t have to worry about how the bills will be paid

• Extensive Support: This insurance helps your employees manage life events such as maternity leave or a chronic condition

How Disability Insurance for Businesses Helps You Maintain Continuity

Unexpected absences can disrupt your operations and cause delays. They can also create stress for the rest of your team. Disability insurance helps you provide financial support to employees during their recovery, facilitating a smoother transition back to work.

This insurance provides your employees with the time and resources to recover. They are less likely to rush back prematurely helping to prevent re-injury or burnout. In turn, you can avoid the costs associated with turnover, onboarding, training, or extended absences.

Managing Employee Benefits with Justworks

As a small business owner, you can maintain operational stability and foster long-term productivity by offering disability insurance to your employees. All you need are the right tools to gain access to high-quality employee benefits, including disability insurance. The Justworks PEO platform helps you manage these benefits while streamlining your HR tasks. Get started with Justworks today.