Group Disability Insurance

Group disability insurance protects your employees’ most valuable asset: the ability to earn an income if they are too sick or hurt to work.

Throughout your working lifetime, you are 3 times more likely to become disabled than you are to die before age 65.

Disability insurance can be confusing with all the terminology so we will break it into pieces and use some examples try to simplify it for you. 

First, there are 2 types of group disability coverage, short-term and long term.

Short-Term Disability

Typical time period 12 to 26 weeks

Long-Term Disability

Typical time period 5 years to age 65

Pre-Tax vs. Post-Tax

When buying benefits through an employer, employees can have the premiums taken our of their check before taxes. With disability, it is beneficial to pay the premiums with post-tax dollars. To make is easy to remember, the employee is going to pay income taxes on either the premium or the benefit.

The taxes on the premiums are much less than the taxes on the benefit.

Benefit Amount

The benefit amount is calculated on a percentage of the employees salary. The maximum most insurance companies offer is 66.6% of the employees salary. Why? The employee must have an incentive to return to work.

Elimination Period

The elimination period is the time period between an injury or illness and the beginning of benefit payments from the insurance company. The shorter the elimination period the more expensive the policy.

Probationary Period

Is a provision in some disability income policies stipulating that benefits will not be paid for an illness starting during a specified time period (such as 15–30 days) after inception of the policy.

Benefit Period

The period of time benefits will be paid. Short term disability policies generally range from 30 days to 2 years. Long term disability policies can range from a few years to age 65.