Group Disability Insurance
Group disability insurance provides financial benefits for your employees if they can no longer carry out their duties due to a disability that occurs while the employee is not working. (On-the-job injuries would be covered by workers’ compensation insurance.) The goal of disability insurance is to ensure that disabled employees can support themselves even if they are no longer able to work.
Group disability insurance is dependent on employment status. It is tied to a person’s place of employment. This means that it will no longer provide benefits if they become disabled after they leave their job. Group disability insurance plans are also not reliant on individual health status. Individual plans may disqualify members from coverage if they have certain preexisting conditions. Group plans have no such exclusions. Costs may go up and down on an annual basis.
Group disability insurance plans can vary from state to state or even job to job. Even the definition of disability might change depending on your plan. For the most part, disability is defined as being unable to carry out your job requirements.
Employee disability coverage is tied to their base salary or W2 income. This does not include any salary “extras,” such as retirement funds or yearly bonuses. Policies may be either short- or long-term. This can affect how long they take to start, how long they continue, and how much employees receive. Some policies pay 100 percent of an employee’s salary, but this is unusual.
Most long-term group plans pay 50 to 60 percent of an employee’s salary. But even this is subject to a monthly limit. Disability insurance is not intended to completely replace a salary. Rather, the goal is to make it possible for a disabled employee to get by when they can no longer work. These group insurance plans may also coordinate their benefits with social security disability insurance. This means that employees may receive less money from their employer-provided plan with social security providing the remainder of the funds.
For financial professionals, it may be difficult to imagine how disability insurance functions. After all, working in an office is not a physically demanding job. One example involves an employee whose job depends on typing large amounts of data. Due to a car accident while driving to buy groceries, she injures her hands. Due to her disability, she is no longer able to keep up with the demands of her position. Disability insurance can support her even though she cannot work.