The disability benefit itself also varies among policies. The standard monthly LTD benefit amount is 60% of "basic monthly earnings," which is normal (contractual) salary or hourly wages and does not include overtime, bonuses, stipends, or other compensation.
Benefit "Offsets"
All group LTD policies coordinate benefits with income received from other sources, such as Social Security, that can reduce ("offset") the monthly LTD benefit. Because a disabled employee may be awarded primary benefits for him/herself and an additional amount for any dependent children, it is important to see how the offset is handled under your policy. The school can decide whether the policy should offset any dependent award. Offsetting only the primary Social Security award amount allows a disabled employee with dependent children to receive a greater monthly LTD benefit. This option should be available and will increase your rate by approximately 8%.
Pre-existing Conditions
Pre-existing conditions might be defined as any condition for which the employee was treated prior to the coverage effective date. For new employees added under the policy, disabilities for pre-existing conditions are typically excluded if the disability begins within 12 months of the employee's coverage effective date. Other policies exclude pre-existing conditions for longer periods, such as 24 months—or even permanently. Other standard exclusions include disabilities due to acts of war, intentionally self-inflicted injury, active participation in a riot, and participation in the actual or attempted commission of a felony. Better policies specify that the employee must have been treated for the condition within a specified number of months before the effective date. Three months is a good time period.
Survivor Benefits
Most LTD policies include a survivor benefit, which pays a specified amount to the surviving spouse or children of a disabled employee who dies while receiving disability benefits. Typically, in order for the survivor benefit to be paid, the employee must have been disabled for at least 180 days and receiving LTD benefits. The most common amount is three times the monthly benefit; however, better policies will pay a benefit of six times that amount. Confirm whether the survivor benefit is based on the gross or net monthly benefit.
Employee Assistance Program (EAP)
Some LTD insurance carriers will include an EAP as an added benefit. Such EAPs are designed to help all employees and their family members with problems they might face, including, but not limited to, family relationships, workplace conflicts, loss of a friend or family member, financial issues, and legal problems; it may also offer professional consultation and short-term assistance to identify and evaluate problems, discuss possible solutions and, when necessary, refer the employee to a specific resource. Insurance carriers are willing to include this valuable benefit at no cost to large clients because assistance at an early stage of a problem can decrease stress and therefore the instance of disability.
Waivers of Premium and Conversion Privileges
Make sure your policy includes these two important items:
- a conversion privilege that guarantees that employees can convert to an individual policy when they terminate employment, with no medical underwriting or pre-existing conditions limitation; and
- a waiver of premium for disabled employees. This enables the school to continue covering the employee under the policy, at no premium charge, so that when the employee returns to work there is no gap in coverage.
Providing Information to Employees
Keep faculty and staff informed concerning their coverage and benefits. Your insurance broker or plan administrator can also assist in this area. Another option is to post an electronic version in the employees-only section of your school's Web site. Check with Business Managers in other schools to learn which LTD carriers they use and what benefits are included in their plans. As you compare, make value for the dollar a primary consideration. You can always find a lower premium, but not without compromising essential benefits.
While this article is a good place to start, it does not cover all aspects of LTD benefits, such as regulations and policies for employees over the age of 60, covering employees on a leave of absence, activities of daily living (ADL) benefits, cost of living adjustments (COLAs), certain benefit offsets, regulations regarding mental/nervous disorders or drug and alcohol addiction, and worksite modifications for returning employees. It is extremely important that you discuss all these aspects of your insurance plan (as well as those specifically mentioned in the article above) with your carrier in order to be certain that your school is protected as comprehensively as possible.
You can protect your employees with ISM's Long Term Disability. ISM has focused on LTD insurance for more than 30 years—to ensure that independent school faculty and staff have the very best in long term disability income protection through our Independent School Group Life and Disability Insurance Trust. With nearly 350 member schools, the Trust protects close to 19,000 faculty and staff members.
