What Does it Mean to Be Fully-Insured?
When a company gets big enough, it may realize that it needs to add benefits to either comply with legal regulations or just to increase employee retention or productivity for its own benefit. One of the benefits the business owner may decide to offer might be short-term disability insurance as opposed to the required workers’ compensation, which is why this concept is important. And there’s a few ways for the business owner to get short-term disability insurance.
One of the ways for a business to insure its employees is to be considered fully-insured, meaning that the business is paying premiums (whether being funded by the company or its employees) to an insurance company to insure its employees. The term fully-insured can be used to mean fully-insured by an insurance company, which is the main takeaway here. This type of coverage is considered the traditional way of covering employees.
When a company sets up the plan through an insurance company, the premiums are fixed for a year, meaning they could change from year to year as new insurance contracts are put out. The premium amount is based on the number of employees enrolled in the plan, making it more beneficial for the insurance company and employer to enroll more employees.
The benefit to the employer (or employees if paid by them) is generally reduced premiums and the benefit to the insurance company is a greater pool of people that the risk is spread across.
In a fully-insured plan, traditional insurance concepts and policies prevail because it is an insurance company handling the administration of the insurance. Therefore, for short-term disability, a claim is filed when an employee becomes sick or injured and waiting periods and benefit periods apply, unlike what might be expected in some self-insured plans.
Disclaimer: This information does not constitute financial advice. For specific information for short-term disability policy plans and features, consult your local insurance agent.