Group Disability Insurance From Your Employer

Group disability insurance plans are generally affordable but there is a catch. Your employer might be choosing a plan with skeletal coverage that might not do you any good. Often these plans require the applicant to be disabled and injured to such an extent that they are not able to work and earn an income. 

Group disability insurance will cost you less because many co-workers also buy into it. If you buy one individually, you will end up paying a higher premium. Your broker agent advisor will show you how it is possible to deal with the problem of low coverage by supplementing your personal coverage with the group plan. 

Whichever way you look at it, group disability insurance is desirable because it offers multiple benefits. The biggest benefit is that it is subsidized by your employer, saving you money on premium payments. Other benefits are:

Easy To Apply

When your employer includes you in a group disability insurance policy, you need not prove your income eligibility. You will be eligible even when you have a health issue that may disqualify you from buying a personal disability insurance. A top broker advisor says that when you apply for disability insurance privately, you will have to show proof of income. 

Get Covered For Pre-Existing Conditions

A key benefit of group disability insurance is that you can get covered for pre-existing conditions after 12 months of coverage. Under a private disability insurance policy, you won’t be able to enjoy this benefit. 

Saves You Money

Group disability insurance comes cheaper than private long-term disability insurance. Some employers may even pay a major percentage of the premium for all their employees. You may have to shell out a small amount which is generally adjusted to your salary.

There are a few downsides also to group disability insurance that can affect your disability concerns.

Lower Coverage

You may pay less for group disability insurance but you are likely to receive lower coverage and limited benefits. This limit will be set by your employer and applies to all employees in the group. While you may get an income while you are unable to work because of an illness or injury, your coverage may fall short in some circumstances.

 Your Disability Insurance Is Not Portable

The group insurance plan offered by your employer will not go with you if you move jobs. When you change jobs, you will lose your disability coverage. A private disability insurance plan is portable. You can get the available coverage even when you change your job, as long as you are paying the premiums regularly.

What Are The Options?

You can get both long-term and short-term policies depending on the benefits options offered by your employer. Short-term disability insurance starts paying you the benefits within a short time of becoming disabled. Long-term disability has a waiting period of 90 days in most cases.

MGIS is a premier national insurance program manager with a variety of disability insurance products. 

Who needs Group Disability Insurance?

Group Disability Insurance is applicable to all businesses and is an important consideration for companies looking to provide comprehensive benefits to their employees. While generally not required by law, there are a handful of states that do have some form of state-mandated temporary disability benefits requirements for employers, including California, Hawaii, New Jersey, New York, and Rhode Island.

According to the 1985 Commissioner’s Individual Disability Table A, 50 percent of Americans will become disabled for 90 days or more between the ages of 35 and 65. There is a good chance that some of your employees will deal with a temporary or permanent disability during the course of their careers. As a business owner, you should consider offering disability coverage for when something like this occurs in order to minimize the financial risk to your employees.

From the perspective of your employees, it is important for you to offer Group Disability Insurance to protect them from the risk of losing financial stability in the event of an accident, injury, or illness. Not only does Group Disability Insurance protect your employees, but it also helps your business in attracting and retaining talent at your organization. These days, employees are becoming more and more aware of the kinds of benefits that employers are offering. In order to be a competitive player for talent, you should consider offering Group Disability Insurance as a part of an attractive benefits package.

What does Group Disability Insurance cover?

Group Disability Insurance provides a percentage of pre-disability income if an employee is unable to work due to illness or injury for a specified period of time. The percentage of income that is covered can range, but typically employers purchase plans that cover 50 to 60 percent of income. A common misconception of Group Disability Insurance is that it can cover medical costs. This is untrue, as Group Disability Insurance only provides income or wage replacement benefits.

Group Disability Insurance plans also often take into account disability payments or benefits that an employee may receive from other sources, like Social Security Disability Insurance (SSDI) or workers’ compensation. Generally, policies are constructed so that the amount of employee income that is covered is reduced by the amounts payable by other sources, so that the employee doesn’t end up receiving more compensation while disabled than while actively working.

How much does Group Disability Insurance cost?

Pricing for Group Disability Insurance will vary greatly based on how you design coverage with your insurer. Factors that could affect your premium include:

  • Type of disability plan
  • Amount of employer premium contribution
  • Benefit coverage amount
  • Number of employees

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company.

Group vs. Individual Disability Insurance

Group Disability Insurance is often provided by an employer to their employees. Typically, when an employer purchases Group Disability Insurance, coverage is applicable to all employees, regardless of pre-existing health conditions.

Group Disability Insurance only applies to employees that are employed by the business owner. Therefore, once employees leave your business, they cannot take the coverage with them. Generally, Group Disability Insurance has lower premiums than individual disability insurance and offers less extensive benefits than individual disability insurance.

Individual disability insurance is guaranteed by individual and has no ties to the employer. Each applicant is individually underwritten by the insurance company, therefore each plan is catered to the individual. Individual disability insurance often has higher premiums, but it also offers more extensive coverage and better benefits. In many cases, employees may opt to purchase an individual disability policy to supplement the more generalized Group Disability Insurance offered by their employer.

What types of Group Disability Insurance are there?

Typically, you will find that there are two types of Group Disability Insurance available in the market as an employer. These two forms of Disability Insurance are based primarily on the projected length of time of the disability, and as such are called short-term disability and long-term disability.

Short-Term Disability Insurance

Short-term Disability Insurance will cover an employee who suffers an illness or injury that renders him or her disabled and unable to work. Short-term Disability (STD) will cover a portion of the employee’s lost wages or income. Typically, this is a fixed percentage of your employee’s income. For example, STD may cover 60% of an employee’s income. STD is used primarily to protect the employee with income protection.

Short-term Disability usually kicks in shortly after the date of the debilitating injury or illness. STD typically lasts for less than a year. Depending on the disability insurance plan, you may have a waiting period of a few business days before your employees receive their payment.

Some common life events that are typically covered by short-term disability include:

  • An unexpected disabling injury
  • Pregnancy or birth of a child
  • Prolonged sickness
  • Post-operative recovery after surgery

Long-Term Disability Insurance

As its name suggests, Long-term Disability (LTD) insurance typically begins once your employee’s STD benefits come to an end. There is usually a waiting period before Long-term Disability comes into its full effect; this time can range between 90 to 180 days. The purpose of Long-term Disability Insurance is to assist your employee in the event of a longer-term disability that directly affects his or her ability to continue working.

Long-term Disability usually provides coverage until your employee can return to work or is no longer disabled. In some cases, LTD may also cover a person until they reach the Social Security retirement age.

Some common life events that are covered by Long-term Disability Insurance may include:

  • Cancer
  • Chronic illness
  • Mental illness or mental disorder
  • Degenerative diseases without a cure
  • Back pain
  • Arthritis
  • Accidental injuries that have a prolonged effect
  • Cardiovascular disease
  • Circulatory diseases
  • Heart attack

Final Word

As a business owner, there may be many benefits to offering Group Disability Insurance to your employees. Not only will it benefit and protect your employees in the event of a debilitating injury or illness, but it can also be a compelling part of an employee benefits package that will attract top talent in your field. The risk of an employee developing a short-term or long-term disability is real, and many employees seek out employers who can provide financial protection in the event of an injury. With Group Disability Insurance, your business can provide critical financial support for employees in their time of need.

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