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When a valued employee loses the ability to work due to a job-related injury or illness, a business owner legally bears partial responsibility. While the law requires workers compensation to replace a portion of wages, life can be full of the unexpected, so it is important to be prepared. Life and disability insurance can provide peace of mind for an employee who may be concerned about how his or her family will cope in the event of an unexpected death, or how they will meet financial obligations in the event of an unforeseen injury. Offering employees this valuable benefit can provide the security of the safety net in an unexpected emergency.
Below are some of the mandatory and optional programs available for small employers to consider:
Some employers offer enhanced long-term disability coverage (for purchase) to give employees additional peace of mind. A number of plans also offer physical rehabilitation services.
Payment amounts are subject to age conditions at the time of disability. On average, disability applications take three to five months to process. Therefore, it's wise to apply as soon as a disability occurs. Monthly benefits are based on a person's average lifetime earnings.
The Department of Labor operates a number of programs designed to prevent work-related injuries and illnesses. Information about these is available at Workplace Safety & Health (https://www.dol.gov/general/topic/safety-health).
The following descriptions detail the options available for business owners who want to add a special dimension to their employees' benefits packages:
Keep in mind that this type of coverage doesn't account for increased wealth and expenses or higher mortgage payments if a larger home is later purchased over a person's life. On the other hand, whole life policies do carry an investment component, which accumulates a cash value that the policyholder can borrow against or withdraw.
For both whole life and term life insurance, cost factors include age, health, family history and driving record. A physical checkup is required for either policy type to assess risk factors.
The two types of variable life insurance are variable whole life and variable universal life. In the first, the death benefit depends on investment performance, increasing or decreasing accordingly. The death benefit, however, won't fall below a set minimum amount, as long as premiums are paid. In the latter, the insured may vary the timing and amount of premiums and the face amount of coverage.
Because of associated investment risks, variable policies are deemed securities contracts, which fall under the federal securities laws.
For employees of companies, group life insurance may be part of a benefits package. Because the coverage is a "wholesale" purchase, the premiums are far lower than those of individual policies. Participants receive a "certificate of credible coverage," which they must provide subsequent insurance companies should they leave their jobs and coverage is terminated.