Health & Dental

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Many people entering into business on their own are coming from a corporate environment in which they were provided by their employers with generous "fringe" benefits. Typically these include group life insurance, some accidental death and dismemberment coverage, dependent life insurance, short and long term disability income replacement insurance, extended medical coverage, and a dental insurance package. Suddenly on your own, these are difficult benefits to do without.

When starting or buying a business, the first priority has to be survival of yourself since, if you don't survive, neither will the business. If you need these benefits, you had better get them. But look before you jump.

Whether sponsored by an employer, a chamber of commerce, a union, or a professional organization, all group benefit packages are underwritten by an insurance company, or a group of insurance companies. They are in it to make money, at least break even, definitely not to lose money. For this reason, you really have to take coverage you may not want or need (which make money for the insurance company) in order to get coverage you do want or need (which usually lose money for the insurer). A benefits package is exactly that, a package.

Extended Health Care. This is what pays for prescription drugs, upgrades your provincial plan ward care to semi-private, pays for a whole bunch of medical and para-medical services you might need and which, if you had to pay for them yourself in an emergency, would leave you financially flattened. So everybody needs that.

Dental is even worse for insurance companies in that everybody claims on them and everybody complains about the premiums. The insurance company will love you if you decide not to take it! But families with young children right up to older couples who are apt to have dental problems are wise to have it. Your employees will thank you for it.

Disability Insurance is sort of marginal for the insurance company: mostly they make money at it but less so than with life insurance and A. D. and D. That's because individuals are five times more likely to be disabled than to die during their working lifetimes.
Short term disability, sometimes called weekly indemnity, provides coverage on the basis of a percentage of weekly earnings for up to 17 weeks or so, depending upon the plan. Usually Workers' Compensation will provide a credit if you provide this coverage. It is vastly superior to W. C. since it covers the employees on and off the job, and it is more expensive.
Long term disability insurance is a very complex subject. You are referred to the Section on Disability Income Replacement Insurance for the necessary background which cannot be covered here. Many group disability plans are so inadequate that the employer would be better to buy individual coverage for the employees and recoup part or all of the cost by salary deductions (as might relate to the cost of group disability insurance).

Dependent Life is a frill. Yes, people do have their spouses and children die, but it is a rare occurrence in our part of the world. Usually parents are not dependent upon their children. However, a few hundred or thousand dollars to help pay the cost of a funeral is helpful, especially to employees who do not earn large incomes.

Accidental death and dismemberment provides a false sense of security. People who are not very old rarely think they will die other than by an accident, and this is false thinking. Claims are rare on the accidental death part. However, the dismemberment portion of the insurance can be useful if one of the children should lose an eye or a leg in a serious sporting injury. Again, claims are rare, but you have to take the coverage if you want to get the part you really want.

The life insurance is important. This is the only part of the coverage that is portable, at least to some extent. Group life is rarely cheaper than individual term life insurance when compared head to head but, as an employer, you will want to know that your employees' families are provided for should one of them die. Often, if you have employees who are mostly younger than you, you can get the cost down on a grouped basis, so it could be less expensive for you, if not for your employees.
In planning a group package, you will find that usually the life insurance, the A. D. and D., and the disability insurance are based on a multiple or percentage of base earnings. To keep your costs down, you will want to show your earnings as low as possible. For your own essential coverages, such as family support and bank security, you will want to have your own private coverage anyway.

In cost control for medical and dental, you are wise to look at deductibles and user fees. Many plans pay 80% of current costs for dental up to certain per person, per year maximums. Many medical plans pay all but, say, $2.00 of a prescription. Many medical plans include out-of-province coverage but that is not really your responsibility as an employer unless you send your people out of the province regularly on business. Even if you do, you probably can get for them less expensive coverage than providing it for everybody who works for you. In getting a small business up and running, you want to keep your fixed costs as low as possible by providing the essentials and making it look as if you are being a generous employer. So look for minimum coverage with the option to increase the coverage at individual employee expense. Look for deductibles and user fees as a deterrent to massive use of the plan. And look for limits on a per person per year basis.

Many employers like to provide a retirement program for members of their firms who have been with them for a long time or who are key to the operations of the business, or for themselves. There are, of course, various executive type pension schemes which can be set up: if this is the intention, you would be best to consult an employee benefits specialist. In this article the author is dealing with basic benefits for a small employee group. In the main the author would advise staying away from formalized pension plans and deferred profit sharing plans in favour of group registered retirement savings plans. These plans are much more flexible and involve far less administrative time and expense to look after.

There are a number of categories of plan design possible. We will highlight a few basic types If you are an employer or an employee these may be of interest to you.

There are a number of categories of plan design possible. We will highlight a few basic types If you are an employer or an employee these may be of interest to you.



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