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| What to Know About AD&D Insurance Posted: 01 Mar 2021 07:09 AM PST  There are some employee benefits you hope your employees are able to take full advantage and others you hope are never needed. Accidental death and dismemberment (AD&D) insurance falls into the latter category. Providing for an employee, or their family, should a devastating tragedy occur is a rather inexpensive benefit employers of all sizes can offer that can help bolster their compensation packages. What is accidental death and dismemberment insurance (AD&D)?Accidental death and dismemberment insurance is insurance coverage similar to that of life insurance. It covers an employee in the event of an accidental death, or an accidental loss of use or function of a body part (e.g., arms, legs, eyesight, speech, hearing). AD&D does not cover deaths caused by existing medical conditions; they only cover a loss that occurs due to an unforeseen accident, typically in extreme scenarios of death and dismemberment. Accidental death and dismemberment insurance is commonly used as a supplement to a life insurance policy and can be referred to as a "double indemnity" rider, meaning the beneficiary would receive benefits from both the AD&D and life insurance policies if the insured employee dies in an accident. "AD&D is mostly considered 'supplementary' to a major comprehensive health insurance plan, but it can also come bundled into your benefits or even as a part of your health or life insurance policy," Noor Ali, licensed health insurance advisor and owner of Dr. Noor Healthcare Advisor, told business.com. Although accidental death and dismemberment insurance should be considered supplementary insurance, not a replacement for life or health insurance, it can be purchased as a standalone policy. In fact, if an employee is rejected for traditional life insurance, they may want to consider signing up for AD&D as an alternative safety net for them and their family. "Since AD&D policies don't require a medical exam, they are easy to qualify for," said Chris Abrams, licensed insurance agent and founder of Abrams Insurance Solutions. "They are also inexpensive, as rates are typically much lower than life insurance." [Read related article: Best Liability Insurance Providers] Workers' comp vs. AD&DWorkers' compensation, also known as workers' comp, is similar to AD&D insurance in the sense that it covers an employee in the event of an accident; however, the injury or illness must be work-related, whereas AD&D insurance offers coverage regardless of location. Additionally, workers' comp will cover an employee for a work-related injury or illness regardless of who was at fault for the incident (e.g., the employee, the employer, co-workers, customers). AD&D is a "nice to have" benefit, but workers' comp is essential. Nearly every employer is required by law to provide workers' comp to their employees, and it is useful for protecting employers against litigation. What does AD&D cover?Accidental death and dismemberment insurance is somewhat self-explanatory in what it covers: payment for sudden accidents that lead to death or dismemberment. "Policyholders get lump-sum payments in the event of an accident-related fatality, paralysis, or qualifying injury," said Abrams. "Qualifying injuries refer to the loss of a limb or body function, such as vision, hearing, or speech." Abrams said these policies provide round-the-clock coverage, since AD&D-related accidents can happen any time or place. However, there are a few requirements and caveats to take note of. AD&D policies will not cover death or dismemberment that occurs due to a medical condition, and Ali said the benefit may also not be disbursed if death occurred while the employee was committing a felony. Additionally, AD&D policies require qualifying injuries to be within a specified timeline of an accident to receive benefits, and they have guidelines for payout amount due to the severity of death or injury. An accidental death would typically qualify for the whole "face amount" of your AD&D coverage, but a qualifying injury would only pay out a percentage based on its severity (e.g., 25% payout for loss of fingers, 50% payout for loss of one eye or hand, 100% payout for loss of two eyes or limbs). "For example, you may have a policy maximum fixed payout of $50,00 for accidental death, loss of eyesight in both eyes or loss of hearing in both ears or loss of both limbs," said Ali. "However, if you only lose eyesight in one eye, or lose only one limb, only 50% of the maximum benefit will be paid out, so only $25,00 for loss of sight in one eye or loss of hearing in one ear." Since AD&D insurance policies can be complicated, Abrams recommends employers provide employees with continued education and other services so that they fully understand the benefits and requirements of this type of coverage. Why you should offer AD&D to employeesAlthough businesses are not required to offer AD&D insurance, it can sometimes be automatically bundled with their group life insurance policy. Regardless, offering AD&D insurance can be beneficial to small businesses and their employees. Benefits for employersAccidental death and dismemberment insurance is a great way to create a comprehensive employee benefits package, which can help attract and retain top talent. Employees will likely appreciate the voluntary option for additional coverage, which can lead to employee peace of mind and improved employee morale. In the unfortunate circumstance that an employee must use the coverage, they will be grateful to have the coverage, leading to feelings of goodwill towards the company. "This can lead to employee retention and increased credibility on behalf of the employer for offering coverage during a period of trauma," said Ali. "Families (beneficiaries) of the patient will also harbor feelings of gratitude towards their employer." One of the biggest benefits for employers is that AD&D is not very expensive. Small businesses are able to reap the benefits of creating a competitive insurance package at an affordable rate. "AD&D can make a benefits package competitive without breaking the bank," said Abrams. "AD&D insurance has lower rates than other insurance offerings and is seen as a low-cost coverage option." Benefits for employeesAD&D insurance is a great option for an employee's peace of mind. Instead of worrying about what might happen after an unfortunate event, an employee can rest easy knowing that they will be covered. If they do have to use the coverage, it will serve as a safety net to help them during the recovery process. "It can help to prevent medical bankruptcy, and it can offer financial security for the employee's family," said Ali. "AD&D benefits can also offer the freedom of flexibility to evaluate career directions and options while the patient recovers from a dismemberment." Additionally, AD&D is a great supplemental policy for employees to gain a greater breadth of insurance coverage for a covered accident. "Since workers' compensation only covers work-related injuries, AD&D is a way to protect employees from accidents no matter the location," said Abrams. "Many policies also allow employees to extend the coverage to their families." |
| What to Include in an Employee Contract Posted: 01 Mar 2021 05:00 AM PST  Although the majority of employees in the U.S. work under at-will agreements, some employers choose to have their employees work under legally binding employment contracts. Before determining if employment contracts are right for your business, it is important to know what type of details they include, how they differ from at-will employment, and what their advantages and disadvantages are. What is an employment contract?An employment contract, also known as an employment agreement or a contract of employment, is an agreement between an employer and an employee that outlines the working relationship between the two parties. An implied employment contract can be enforceable, but a written employment contract provides each party with more clarity and legal stability. Employment contracts are tailored to each specific employment relationship. However, there are a few standard details that employment contracts typically cover. "An employment contract often lists the employee's start date, the salary the employee would earn, and any terms around length of employment or dissolvement of the contract," Alison Pearson, head of human resources for Hal Waldman and Associates, told business.com. Employment contract vs. at-will employmentMost employees work under at-will employment, which means the employment relationship can be terminated by the employer or employee at any time, for any reason – as long as that reason is not illegal (e.g., discrimination or retaliation). Employers often have at-will employees sign a document that acknowledges this type of relationship, like an offer letter or employee handbook acknowledgment. Employment contracts are essentially the opposite of at-will employment. They set forth guidelines and restrictions about the employment relationship that are legally binding. What is typically included in an employment contract?Since every employer/employee relationship is unique, the specific contents of an employment agreement are also unique. They will match whatever employment relationship is being formed. "There is no standard employment agreement, so each one should be tailored to the specific situation facing the employer and the employee," said Jeffrey Siegel, employment law attorney and partner at Morgan, Brown & Joy. "Employers and employees can negotiate what is important to each side." With that said, there are 10 different aspects that are typically defined in each employment agreement. 1. Duration of employmentThe employment contract should clearly state for how long the employer agrees to retain the employee. This includes the start date and end date. This is one of the most basic pieces of information that every employment contract should address. 2. Employee position and responsibilitiesAlthough an employment contract doesn't need to be so granular as to define every single task an employee must perform, it should serve as a clear guideline for what the employee's general position and responsibilities are. These must be carefully defined because employment contracts are legally binding. If the employer wants to change the employee's primary responsibilities before the employment contract ends, they will have to renegotiate the contract with the employee. 3. Employee scheduleThe contract can outline what the employee's work schedule will look like. It can include details like what days and hours they work, when they take breaks, how long their breaks are and what holidays they have off. 4. Employee compensationEvery employee contract should include information about how much money the employee will be paid. Employee compensation details can include the employee wage amount, whether the employee is hourly or salaried, what their bonus structure looks like and equity options. 5. Employee benefitsAnother form of employee compensation that a written employment agreement should outline is employee benefits. You are legally required to provide employee benefits like family and medical leave, health insurance (if you have 50 or more full-time employees), unemployment insurance and workers' compensation insurance. You can also offer benefits like dental and vision insurance, health savings accounts, retirement savings plans, life insurance, commuter benefits, and more. However, it is important that you only agree to provide benefits you know you will continue to offer, as you are on the hook for providing them to the employee for the duration of their contract. 6. Intellectual property ownershipWhen an employment relationship is terminated, employees are armed with a lot of company knowledge that most employers don't want shared. An employment agreement can remedy this by including a clause that addresses the ownership of intellectual property (i.e., patents, copyrights, trademarks, and trade secrets). 7. Termination guidelinesAn employment agreement can outline what type of employee actions or behaviors are grounds for termination. A termination provision can be especially helpful for employers who want to end an employment relationship with an unmanageable employee under an employment contract. 8. Severance paymentsOne aspect that makes employment contracts an attractive option for employees is the promise of severance pay. A severance package is additional compensation provided to an employee after the employment relationship has ended. It can include benefits such as extended life and health insurance coverage, stock options and employee retirement account funds. You are not obligated to offer severance pay to employees, but it can entice employees to commit to employee contracts. 9. Dispute resolution proceduresContracts can include details about how to resolve employee disputes. For example, most agreements require employees to agree to mandatory arbitration as a way to resolve issues. 10. Post-employment obligationsWhen your employee agreement expires and the employment relationship is severed, there is little to nothing stopping that employee from taking your sensitive and private company information to your competitors. To protect your business, you can have the employee agree to details about post-employment obligations. Siegel said these can include noncompetition, nonsolicitation and nondisclosure of confidential information clauses. You may also have employees sign separate noncompete agreements. Who needs an employment contract?There are no laws that require any business or employee to provide or agree to employment contracts; however, that does not mean it can't be beneficial to have one. For example, you may want to use employment contracts when hiring employees who handle very confidential or sensitive information, or when bringing on employees who will be working with very specific timelines or have certain performance demands. They can also be used when trying to attract highly skilled workers in a field where they are scarce. Conversely, you might not want to require employment contracts if your business is constantly growing and changing or you think you may have to breach the contract at any time. In general, Pearson said that small business owners rarely need written employment contracts – instead, they employ people under implied contracts. "Often, the terms of the employment contract are dictated by the market and the relevant bargaining position of the parties," said Siegel. "For that reason, we see employment contracts more frequently with executive-level employees." What are the pros and cons of using employment contracts?Employment contracts can be extremely useful when applied to the right scenarios, but they also come with a few limitations to take note of. Pros of employment contractsSiegel said employment contracts offer employers the following advantages:
Employment contracts can be advantageous for employees as well. They offer employment stability, job clarity and legal protection. Cons of employment contractsPredetermined contract length and clearly defined job requirements can be positive or negative, depending on how you look at it. For example, if an employment contract has a short time frame, it does not offer the employee job security. If the contract outlines very specific job requirements, it may be too restrictive, not allowing the employee to grow in the position. If an employer wants to end or change the employment relationship, it can be very difficult and expensive. "Although sometimes necessary to attract talented employees, an employment agreement also imposes administrative burdens on an employer, such as notice provisions before terminating the employment relationship and renewal provisions before extending the relationship," said Siegel. Employee contract templatesEmployment contracts are governed by state law, so Siegel advises employers to be mindful of the law of the jurisdiction in which they operate. "For example, states have differing approaches to noncompetition, nonsolicitation and nondisclosure agreements as well as arbitration clauses, and a good employment agreement will be designed to comply with applicable law," he said. Although you should always work with legal counsel to tailor an employment agreement to your specific situation, you can reference an employment contract template to get started.
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