Colonial Life Launches New Voluntary Group Product

By Cyril Tuohy

InsuranceNewsNet

Colonial Life & Accident, seeking to capitalize on the growth in the voluntary market, has announced the launch of a new voluntary group short-term disability insurance plan to help employees protect their income.

The guaranteed-coverage product is being offered to companies with 100 or more employees, and is available for employees up to age 74, the company said.

“Our new voluntary group disability plan allows employers to offer an affordable insurance plan to their employees, helping to provide a financial safety net many workers desperately need,” Steven Johnson, assistant vice president of product development at Colonial Life, said in a news release.

In the voluntary benefits market, employers offer their employees the option of buying the coverage, usually on their own. Because employers don’t contribute to the premium, the voluntary market is a good deal for employers.

While there’s virtually no cost to employers for offering the coverage, the benefit acts to retain employees.

For employees, the coverage is cheaper through the employer than by purchasing it in the individual market because of favorable group rates negotiated by the employer. The employee’s out-of-pocket premium is simply deducted though payroll so buying the coverage is convenient.

Sales of voluntary products in 2012 were up 6.6 percent compared to 2011, with total new business premiums exceeding $6 billion, according to Eastbridge Consulting’s annual U.S. Worksite/Voluntary Sales Report.

The emergence of high-deductible health plans, which shift a higher percentage of the cost of health care onto employees, has helped fuel the popularity of voluntary benefits as employees look for cheaper coverage by taking advantage of group rates.

The estimated short-term disability premium in force in 2011 was $3.64 billion, an increase of 3 percent over 2010, according to the 2011 U.S. Group Disability Market Survey published by Gen Re.

Short-term disability typically kicks in after paid leave has been exhausted and employees are out of work for six months or less. Short-term disability contrasts to long-term disability, which replaces a percentage of income in case of a catastrophic injury that leaves an employee permanently disabled.

Colonial said that the short-term coverage allows employees to protect up to 60 percent of their income and receive up to $7,500 in monthly disability benefits.

Employers can choose an optional benefit covering psychiatric and psychological conditions. Another option allows employers to have the benefit start on the first day of hospitalization or the first day after an elimination period, which is the period between the onset of the disability and the time before a policyholder is eligible for benefits — in effect, a deductible.

The short-term disability policy also allows employees to continue their coverage up to age 75 if they change jobs or retire, the company said.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].