Group Disability Insurance

Group Disability Insurance: A Great Employee Benefit

(It's Great For Business)

Businessman looking at the camera while working on his tablet and sitting in the office with employees in background

Hiring and keeping great employees is not easy for small and medium-sized businesses. One study found that the cost of replacing an employee averages 33% of salary. 

What if an experienced employee becomes disabled? How can you protect your business and get them back to work?  Offering group disability insurance can help. Contact an independent insurance agent. Learn how group disability can benefit your business.

What Is Group Disability Insurance?

Group disability insurance is a valuable benefit offered by some employers. The plans are cost-effective and easy for the employee. Usually, all employees are eligible.

 Group disability insurance pays a monthly benefit when employees can't work because of injuries or illness.  The insurance company expects the employee to prove they are disabled and can’t work. 

They want to know 3 things:

  • Are you under the care of a doctor?
  • Does the injury or illness prevent you from working?
  • Are you receiving any income from employment?

If the answers are yes, yes and no then the insurance company pays the benefit. It's that simple. 

What Is The Difference Between Individual Disability Insurance And Group Disability Insurance?

Individual disability insurance is purchased privately. There is an underwriting process which may require medical and financial information. 

 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 not portable to new employers.

Why Offer Group Disability Insurance?

The risk of disability during working years is significant. A woman age 28 has a 28% chance of disability during her working years. A serious injury or illness can be a challenge for both employees and business owners. Employees need to focus on getting well. Along with physical and emotional issues, financial concerns can make recovery more difficult. 

Business owners have to grapple with pay and workload issues. After sick and vacation time is used up how long will the employee be paid? Business owners want to do everything they can to help good employees recover and get back to work. That may not be financially possible.

A group disability plan protects the employee’s income. The plan helps protect the business owner’s investment in the employee. There are 2 types of plans, short term and long term. They may be offered as employer paid, voluntary, or both.

What is a Short Term Group Disability Plan?

Short term disability plans pay 60-70% of the employee’s salary for less than a year. The benefits usually start paying within 14 days of the employees illness or injury. Short term disability covers pregnancies, recoveries from surgery and other common occurrences.

For the employer short term disability plans pay the employee after sick pay runs out. It eliminates the problem of paying a valued employee for an extended time while they are out.

What is a Long Term Group Disability Plan?

Long Term group disability plans pays a part of the employees salary. The employer determines the benefit. The benefits start paying between 90 days and 1 year of the employees illness or injury. Benefits pay for 2 years or more. Some plans reduce the benefit by social security disability benefits.

For the employer, offering group long term disability plans is a tool to keep employees. When offered, it is worth spending some time educating employees on the risk of disability.

Voluntary Plans

Voluntary plans are available for both short and long term disability plans. Employees pay the premium and choose to take part. One reason to consider voluntary plans is that the benefits paid are tax free. 

Voluntary plans have no out of pocket cost for the employer. The value provided to the employee is easy and inexpensive access to coverage.

Return To Work Features

Long term group disability plans have options that encourage employees to return to work. These options include financial incentives such as Work Incentive Benefits. Work incentive benefits pay more to return to work while participating in a rehabilitation program. 

Plans may also include worksite modification benefits. This feature pays for modifications of work stations or more equipment. 


Employee Assistance Programs and Other Value Added Features

EAPS provide support for employees who may be facing difficult issues. Family crisis, addictions, and depression are common issues.

Retirement Contribution Coverage pays for contributions to the employer’s retirement plan

Emergency Travel Assistance pays for hospital and emergency evacuation while traveling. 

How Much Do Group Disability Plans Cost?

The insurance company will charge premiums based on:

  • The number of employees
  • The type of plan
  • The type of business
  • Coverage offered

The premiums are less expensive than individual coverage. Group disability plans are flexible. They can be designed to fit within an employer’s budget. Voluntary plans may also be offered at no cost to the employer. 

Group Disability Insurance For The Self Employed

A small business can also offer groups disability plans. Small group disability plans are available for as few as 2 people. These plans will have fewer options and lower benefits. They may also need some medical and financial information of participants. 

Professional Firm Group Disability

Professional firms can offer group disability insurance to all employees. 

If your business is a professional firm you may want to consider an executive plan. An executive plan supplements group coverage for highly paid owners, partners, and employees. Each covered person gets an individual policy with a high monthly benefit. The insurance company will not ask for the usual medical and financial information.

How Are Group Disability Plans Taxed?

The taxation of disability benefits is based 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. Premiums paid by the employee are included in W-2 income.

Protect Your Investment

Experienced and productive employees are an important asset to your business. A group disability plan can help you keep them. Your  local independent insurance agents can help you find a plan to fit your budget.

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