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The Severance Conundrum

As corporate takeovers, mergers and acquisitions continue to be regular occurrences in many business markets, continued employee downsizing throughout most industries is inevitable. Severed employees must come to grips with the reality that the employer was ill-prepared or lacked the resources necessary to provide a successful future relationship. In good form and for employer liability safeguards, conscientious business owners will provide comprehensive severance packages at the moment of termination to help the newly unemployed through the sometimes difficult transition.

American business severance agreements frequently 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 unaware of this dilemma, they frequently open themselves to great liability risks and threat of lawsuit.

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

It’s quite uncomfortable to contemplate loss of employment or the firing of an employee, but the need for corporate downsizing and restructuring will continue throughout this country. Contact us for more information about severance insurance for your business clients.


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