Severance Woes


I can’t believe it’s December already.  Despite the horrific year endured the world over, the months seemed to fly by.  Although it felt like a quick year to me, I realize many have struggled physically and financially.  Millions are out of work in this country with no definite end in sight.  We are still at odds with this stubborn pandemic.  Infection rates are rising all over the nation with the only bit of hope being a likely vaccine in the future.  COVID-19 is still with us and is still killing Americans every day.  I believe the road ahead will continue to be arduous and time consuming. 

Coronavirus has turned many American industries upside down.  Insurance markets are quickly hardening.  Retail and entertainment sectors are constantly being forced to reorganize, shut-down and downsize.  This terrible landscape is trickling throughout many U.S. companies large and small.

As the pandemic drags on, continued downsizing throughout most industries is inevitable, and 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 possible liability relief, conscientious employers will provide comprehensive severance packages at the moment of termination to help the newly unemployed through the 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.

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 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 this year, especially during the holidays, but the need for corporate downsizing will continue according to economic forecasts. Contact us for more information about severance insurance for your business clients.

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