Paternity Leave: How Parental Leave Insurance Supports Equal Leave for Families

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By Laura Knight on Mar 6, 2024

4 min read

A smiling man feeds a baby a bottle while working from home. The baby is grabbing a fist full of chart printouts from the desk.

For many new parents in the U.S., getting the time off to care for their new child is fraught (and for some parents, simply not possible). Unlike most other countries in the world, the U.S. has no national requirements for paid parental leave, and so parents are left to navigate a patchwork of options that can vary widely by location and employer.

Common Parental Leave Solutions in the U.S.

The Family and Medical Leave Act (FMLA) guarantees 12 weeks of job-protected unpaid leave, but few parents can afford to go three months without income (especially with the added expenses of a newborn child).
Short-term disability (STD) is a type of insurance that covers temporary medical issues like non-job-related injuries or illnesses, that prevent someone from working. STD has several shortcomings as a solution for parental leave, however - the biggest of which is that it usually only applies to pregnant mothers.
State-funded paid leave, when available, is often more extensive than leave available under STD, and more likely to apply to parents of any gender. This type of leave can be a great option for new parents - if it exists in their state. Unfortunately, only a few states currently offer parental leave programs.
Expecting parents can bank PTO days and use them all at once to take several weeks’ absence for the birth of a child. This requires extensive advanced planning, and caps on PTO accrual or company policy on numbers of consecutive days off can impose further limitations.
Company-funded paid parental leave is one of the best options for new parents, and it’s no surprise that it’s one of the most-desired benefits for U.S. workers. Providing this benefit, however, can be very expensive for the company, and many SMBs can’t afford to offer it.

Out of the options above, short-term disability is the most widely available, and the most commonly used solution for paid parental leave. One big problem: in most cases, it’s not available to new dads.

Paternity Leave is Increasingly Important for Families

Excluding fathers from parental leave isn’t just unfair - it’s increasingly out of step with U.S. families. The average amount of time U.S. dads spend caring for their children has nearly tripled since 1965, and fathers now make up nearly 20% of stay-at-home parents.

Dads’ expanded role as caregiver is reflected in changing social attitudes as well. In a 2023 survey over three-quarters of Americans agreed with the statement that children are better off when both their mother and their father are equally focused on work and childrearing. Research has also shown a link between taking paternity leave and long-term financial benefit for the family.

So, how can businesses support their employees who become fathers, without breaking the bank?

Parental Leave Insurance: Affordable and Equitable

Parental leave insurance is designed to make it affordable for SMBs to offer paid parental leave to their employees.

How it Works

Parental leave insurance is a commercial insurance program; like other types of commercial insurance, the SMB gains coverage by purchasing a policy. The SMB can choose the level of benefit they want to offer their employees, including things like length of leave and percentage of salary covered, and then pay a regular premium based on the selected benefits and the demographics of their employees.

When a covered employee takes parental leave, the SMB can file a claim through their parental leave policy to be reimbursed for the cost of paying the employee during the covered leave period, as specified in the company’s parental leave policy.

How Parental Leave Insurance Helps New Dads

Parental leave insurance is a much more inclusive option than STD. Boost’s product, for example, will cover paid leave for any new parent, regardless of whether they are actually giving birth. This includes not just fathers, but also foster and adoptive parents (who are generally also ineligible for STD).

With parental leave insurance, SMBs can offer equal maternity and paternity leave benefits. Not only does this acknowledge and support the role of new fathers in caring for their children, it also empowers families to choose leave that is right for them, instead of making the best of whatever they can cobble together.

How Parental Leave Insurance Helps SMBs

A parental leave insurance policy benefits the business as well as the employees:

Lower expenses. Funding a paid parental leave program requires a business to try to forecast how many employees might take leave in a given year, set aside money to cover those potential costs, and sometimes pay an extra temporary employee to fill in while the parent is out. Buying parental leave insurance means much lower costs overall to providing this benefit.

Predictable costs. One of the more challenging aspects of self-funding parental leave is the uncertainty: it’s impossible to actually know how many employees will become parents in a given timeframe. This means costs can vary wildly from year to year. With parental leave insurance, these unknown expenses are replaced by a regular, predictable premium payment, making it much easier for the SMB to budget around it.

Talent attraction and retention. Highly valuable employees are often in hot demand, with many companies competing to hire them. As we’ve seen, paid parental leave is a very desirable benefit, and offering it can help an SMB differentiate themselves as a great place to work. It also helps retain top employees if they become parents. In a recent McKinsey survey of fathers, many reported that “they felt more motivated after taking leave and that they were considering staying in their organization longer.”

For insurtechs and other businesses that work with SMBs, offering parental leave insurance provides your customer with an affordable path to supporting (and retaining) their employees who become parents, regardless of gender.

Interested in adding parental leave insurance to your offerings? Get in touch today.

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