If you own a business, then you already know all of the various types of insurance that you can use to protect yourself and your business. Business owner disability insurance policies normally focus on two things: protecting the business and protecting the business owners’ incomes. But what about disability insurance for severance agreements? Surely your severance packages take this into account, no?
Disability Insurance for Severance Agreements: Employer Packages
In our current economic climate, it is no surprise that we are seeing more and more corporate mergers, acquisitions, and reorganizations.
As this happens it is necessary for companies to “let-go” or “sever” business relationships with long-term white collar or skilled blue collar employees.
With these high-income earners, astute employers most certainly created binding severance packages with the employees to minimize future liabilities or the chance of future lawsuits should the employee be terminated.
As an employer, having disability insurance for severance agreements is extremely important. Within most employer/employee agreements is long term disability insurance coverage. This plan will cover the employee, via a group plan, in the event the employee becomes disabled and unable to perform their job duties for a specified amount of time.
However, once the former employee is removed from payroll they will be removed from any group coverage plan. Human resources will scramble to replace the group plan with an individual plan, but will quickly learn that most carriers will not cover an “unemployed” individual.
This means the financial responsibility falls back to the employer.
A new plan, based on the contractual agreement provided by the former employer, is available. This plan covers the severed employee during unemployment. This relieves the employer of the financial liability created by the employment agreement contract. Having disability insurance for severance agreements is not just prudent, it can save your company a lot of money in the long run.
Disability insurance for severance agreements is offered through Petersen International , a cover holder for Lloyd’s of London.
Qualifying for a Disability Insurance for Severance Agreements Policy
This plan would still be classified/handled as a personal disability plan for the former employee and the former employee would have to take a paramedical exam and go through a standard qualifying process.
In the event of health problems or high risk activities, certain exclusions may be made to he policy.
This plan is a 12 month contract versus the more standard 5 year contract. It is based on a written employment agreement. All plans are written as “any occupation” and the beneficiary is the employer.
Any employer provided contract benefits, that are not covered by insurance, are still paid to the employee by the employer. This plan is designed to safeguard the employer of financial obligations should the former employee become disabled while unemployed.
Contact us today for a confidential discussion about your needs. Our toll-free number is 888-636-2310 or use our quote request form.