General

COBRA and Short-Term Disability Insurance Is Your Employer Comparing Rates for Both?

Nathan Bailey 

With an aging population, the cost of disability insurance continues to rise. The Social Security
Administration recently reported that disability claims filed last year increased by 9 percent. A
government worker stated that this is not what they are looking for. “If people don’t file for
disability claims, it is going to cost us a lot.” In recent years, many states have added layers of
bureaucracy and increased premiums, making the idea of a no-fault disability plan look more
attractive. Are no-fault plans really worth the price?


Disability Insurance (DIA), provides protection for a person who has suffered a disability that
limits their ability to earn an income. It also pays expenses related thereto. Disability Insurance
can provide coverage for up to ninety-days of lost earning ability, up to one hundred twenty-five
million dollars (twice the full benefit) for medical expenses and up two weeks of missed work.


Coverage can be purchased through the employer, an individual health plan offered through an
association or as a standalone disability policy. If the employer offers paid vacation, sick leave,
or other benefits, employees can choose between COBRA and other continuation benefits at the
time they start work.


During the past fifteen to twenty years, the cost of disability insurance has steadily risen in
relation to the wages of those with disability. Over the same period, the number of employees
without disability insurance has dramatically decreased. According to the Kaiser Family
Foundation most employers offer some type of long-term disability insurance. However, not all
do. Only 29.9% have employer-sponsored insurance for disability, and that number is only
growing.


One reason the cost of disability insurance has not kept pace with increases in worker
compensation is that people do not realize they can get disability coverage, because they think
they must purchase coverage from their job. In many cases, companies provide short-term
disability coverage and then make the long-term commitment more affordable by charging a
higher premium for the policy. Unfortunately, employers may not offer short-term coverage. Even
if they are granted a long-term work break, these people will need to pay the entire premium for
disability coverage.


An employee can shop around for a lower premium from an insurer that offers more than just
short-term coverage. Also, there are some employers that will allow their employees to buy
disability insurance directly from them, without a contract or written guarantee. Also, COBRA
laws vary from state to state, and a professional insurance agent can explain the differences
among the different plans. It is best to learn the basics of COBRA before making any decisions.

COBRA’s flexibility is what makes it so popular. A person can be covered under it for as long as
is necessary for him to recover from an injury or illness. Short-term disability insurance is often
needed until the person’s current or new job offers a long-term plan. If they can keep their
current job, they may be eligible for Social Security Disability Benefits. These benefits are slightly
less expensive than short-term coverage. On the other hand, COBRA policies are generally less
costly than filing disability insurance claims on your own.


Another important consideration is the applicant’s past health history. Many applicants
mistakenly believe that because they have worked in a job occupation for many years that their
chances of developing a disability are low. It is not always true. There are many personal factors
that can impact the rates of disability insurance.


A person who has been laid off will be considered very high at risk because he may not possess
the skills or abilities necessary to continue his work. The insurance company may therefore
charge a higher premium for his disability coverage, even if the circumstances do not warrant
such high premiums. The same holds true for someone who has suffered from an injury or
illness, but is fully recovered. This will result in a higher cost for the insurance policy. Finally, a
person who has had a few absences from work over the past few years will also likely incur
higher premiums due to the increased likelihood of becoming disabled again. When you have no
coverage for a longer period, the chances of getting sick are higher than those who have full
coverage

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