Disabilities can have a profound impact on employee’s finances. Not only can disabilities prevent employees from being able to perform their current work, but they also sometimes make it impossible for employees to do other jobs. Employees who suffer from disabilities often suffer a significant drop in income, and they may not be able to earn any income at all. Group disability insurance gives businesses a way to help protect their employees from the losses of income that disabilities can cause.
Group disability insurance is a type of insurance that provides financial assistance for employees who are unable to work due to a covered disability. As a group plan, the risks of employees becoming disabled are spread over all covered employees. This helps keep premiums for individual employees affordable.
Group disability plans have specific criteria that disabilities must meet in order to be covered. These are detailed in plans’ terms and conditions, and their other paperwork. Because each plan has specific criteria, business owners should review a plan’s criteria carefully with a knowledgeable insurance advisor before selecting a specific plan.
In general, plans’ criteria focus on both how long an employee has been unable to work, and whether they’re unable to work in their field or whether they can’t work at all. Some plans also have limits regarding how long they’ll pay for a covered claim.
There are at least two different ways to categorize group disability claims.
First, disability plans can be grouped by how long they pay on covered claims. Long-term plans typically provide coverage for disabilities that prevent employees from working for months or years. These plans often require employees to be unable to work for a length of time before the plans will begin providing supplemental income, but once they start paying many will continue paying for a long time. In contrast, short-term disability plans usually pay soon after an employee becomes disabled, but they’re only intended to provide additional income for a short duration of time, a few weeks or months. After the stipulated time period is over, these policies stop providing supplemental income.
Second, plans may provide either own-occupation coverage or income-replacement coverage. Own-occupation plans tend to cover employees who are unable to work in their chosen field, while income-replacement coverage usually only covers employees who are unable to work in any occupation. Income-replacement coverage often costs much less than own-occupation coverage, but income-replacement coverage can leave disabled employees with little protection if they’re able to work in another job -- even if that position pays much less than their current one.
Many businesses can benefit from obtaining group disability insurance. By adding it to employees’ benefits packages, businesses can both better protect their current employees and give prospective employees more comprehensive compensation offers. An advisor can help a specific business consider how a group benefit plan might benefit the business and its employees.