What Is Group Disability Insurance?

Hiring and keeping great employees isn't always easy for small and medium-sized businesses. Further, the cost of replacing an employee can be a significant loss for your company. Offering group disability income insurance can be a great incentive to attract and maintain employees over time.

Luckily, a local independent insurance agent can help you shop and compare group disability insurance policies to find the best match for your unique company. These agents have access to the best group disability insurance plans and rates. Until then, here's a guide to employee group disability insurance, what it covers, and why it's beneficial.

What Is Group Disability Insurance?

Group disability insurance pays a monthly benefit when employees can't work for an extended period due to non-work-related injuries or illnesses. Disability insurance for groups is a valuable benefit offered by certain employers to attract new talent and retain these employees for many years. The plans are cost-effective and easy for the employee to reap the benefits. 

Group disability insurance can replace up to 60% of an employee's normal income while they're unable to work. Many plans also cap coverage at a certain maximum dollar amount, such as $10,000 per month. 

Usually, all employees are eligible for coverage if they meet certain criteria. However, injuries and illnesses that were caused by the job or work environment in some way are not eligible for group disability coverage and must be claimed under workers' compensation insurance. You may also hear group disability insurance referred to as group income protection insurance.

What Does Group Disability Insurance Cover?

Small business group disability insurance can cover various types of injuries, illnesses, and diseases that result in employees being unable to work for an extended period. These policies can cover the following:

An independent insurance agent can help you find more information about all the possible conditions covered by a group disability insurance policy.

Group Disability Insurance Benefits

A serious injury or illness can be a challenge for both employees and business owners. Employees must be able to recover so they can return to work. However, along with physical and emotional stressors, financial concerns can make recovery more difficult. 

Business owners also want to do everything they can to help good employees recover and return to work, but that may not be financially possible without additional coverage. Offering employer disability insurance group plans can protect employees and the employer alike from the financial strains presented by serious injury or illness of a worker. These policies replace a portion of the employee's income while they're unable to work, and remove the financial burden from the employer to fund their employee's recovery.

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Short-Term vs. Long-Term Group Disability Insurance

There are two major types of group disability insurance to consider:

• Group short-term disability insurance plans: These can cover injuries and illnesses lasting between three and six months, or even up to a year. These policies come with a waiting period of up to days.
• Group long-term disability insurance plans: These can cover the employee for a year or more, and coverage can even last for decades or until retirement. These policies come with a waiting period of 90 days or more.

The main difference between these policies is the length of time coverage is needed. Employees with less severe injuries or illnesses who can return to work faster can likely benefit from short-term disability insurance. 

The Difference Between Individual Disability Insurance and Group Disability Insurance

Individual disability insurance is purchased privately. The underwriting process may require medical and financial information. For example, the individual may have to take a medical exam before being approved for coverage.

Group disability insurance is purchased through the employer as part of an employee benefit plan. There is no underwriting process for the participant. Group disability benefits are tied to your job and cannot be transferred to another employer. This is a big reason why offering group disability coverage is an enticing benefit for employers.

Return-to-Work Features

Long-term group disability plans offer options that encourage employees to return to work. These options include financial incentives, such as work incentive benefits, which provide higher compensation for returning to work while participating in a rehabilitation program. Plans may also include worksite modification benefits, which cover the costs of modifying employee workstations to reduce strain or injury or purchasing additional, updated equipment. 

How Much Does Group Disability Insurance Cost?

The cost of group disability insurance can vary widely based on the employer, business industry, and other factors. Some factors that can impact the cost of group disability insurance include:

Group disability premiums are often less expensive than individual disability coverage. Voluntary plans may also be offered at no cost to the employer. An independent insurance agent can help you find affordable group disability insurance near you.

How Are Group Disability Plans Taxed?

The taxation of disability benefits depends on who pays the premium. If the employer pays the premium, the employee pays tax on the benefit. If the employee pays the premium, the benefits are not taxable. Premiums paid by the employer are tax-deductible, while premiums paid by the employee are included in W-2 income.

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An Independent Insurance Agent Can Help You Find Group Disability Insurance

When you're ready to protect your employees with group disability insurance, no one's better equipped to help than a local independent insurance agent. These agents have access to multiple carriers, so they're free to shop and compare group disability insurance quotes and policy options for you. 

They'll get you set up with a plan that includes the best blend of coverage and cost. And down the road, your agent can help you update your coverage when necessary.