Group Disability Insurance
Many Americans have group long-term disability insurance available to them through work, but many more do not understand what it can offer them. Many do not even know what disability insurance is or what it means. Simply put, a disability insurance policy insures one’s ability to work and earn a wage. Most people must work to get paid. If they do not work, they do not receive a paycheck. Disability insurance covers employees for a certain percentage of their regular pay if they are unable to work due to an illness or injury.
How does group coverage work with disability insurance? Long-term disability policies have a designated benefit-and-elimination period. A disabled worker must wait for that time period to elapse before receiving any benefits. The “benefit period” that follows fills the maximum amount of time that a worker can receive benefits. Most long-term disability insurance policies have a 90-day elimination period and a benefit period that pays out until the age of 65.
Workers who enroll in a group disability plan can expect to receive benefits roughly equal to 60 percent of annual pay. Higher wage earners, including management, usually receive a lower percentage of pay coverage, as most policies have maximum benefit levels in place. Once a worker claims benefits, he or she must pay taxes on the funds, particularly if the employer is paying the premium on the group disability insurance. A taxable 60 percent benefit provides about a 45 percent replacement for a full year’s pay. If a worker is paying the premiums on his or own, the benefits are, generally speaking, paid on a non-taxable basis.
A group disability policy may offer two categories of coverage. Each policy is different, but, in general, there are two definitions that relate to work disability: “Own-Occupation” and “Any-Occupation”. Under “Own-Occupation,” a worker has full protection for 24-36 months if he or she cannot perform his or her regular job. If the employee is still disabled after 36 months and cannot work at the regular job, then the insurance company may dispute any claims and require the worker to find employment in any other profession (if he or she is capable of doing so).
Workers who receive Social Security find that, for every dollar from Social Security, group disability is reduced by the same amount. This condition may also apply if an employee receives income from other sources. Group disability insurance is not portable. It is important to check specific group disability insurance policy information under the “Other Income Benefits” section.