Severance: Mitigating Corporate Liabilities

As corporate takeovers, mergers and acquisitions continue to be regular occurrences in many business markets, occasional workforce reorganization and downsizing throughout most industries are inevitable.  Most importantly for employment liability safeguards, tactful and conscientious business owners will provide comprehensive severance packages at the moment of termination to assist the severed employee through that often-difficult life transition.

Employment severance agreements typically include but are not limited to the following: additional income in regularly scheduled terms of months or years, payment for unused vacation time or sick leave, stock options, retirement benefits and limited continuation of life, dental, medical and disability insurances.

Employee benefits are financially imperative to millions of Americans.  Most have become economically dependent upon employer-sponsored insurances that not only serve to protect the covered employee but may reach to protect that employee’s immediate family as well.  Often taken for granted by those the programs benefit, the corporate expense of maintaining such employee benefits can be fiscally straining to any company, no matter the size.  But as previously mentioned, dutiful employers may extend coverage through a severance arrangement.  And therein lies the problem.

Group insurance carriers require the immediate removal of a severed employee from an employer-sponsored plan with the possible offer of conversion to individual coverage.  Family or individual life, dental and medical insurance policies are available from any number of insurance companies.  Disability coverage is the exception.  Without future employment contracts in place, traditional disability carriers will not insure an unemployed person no matter how recently that person was terminated.  Since most employers and severance agreement drafters are not always aware of this dilemma, they frequently open themselves to additional liability risks and possible threat of litigation.

Petersen International is able to assist employers, your business clients, in mitigating such liabilities and avoiding the unnecessary and potentially expensive need for self-insurance.  The Petersen International Severance Disability Insurance Plan provides a severed employee with long-term disability benefits which can be sculpted to fit the insurance requirements of a legal severance agreement. 

Contemplating loss of employment or the letting go of an employee isn’t typically a comfortable practice, but the need for downsizing and restructuring will continue to be prevalent in corporate America. Contact our disability department at (800) 345-8816 for more information about severance insurance for your business clients.