Group Disability Insurance
Employers provide the majority of disability income protection in the United States. It is an insurance product designed to replace anywhere from 45-60% of an employees gross income on a tax-free basis should a sickness or illness prevent them from earning an income. There are two forms:
- Short Term Disability (STD) which replaces a significant percentage of an employee's income from the first day of an accident and the eigth day of an illness and lasts anywhere from 90 days to 2 years.
- Long Term Disability (LTD)typically pays 40% - 60% of an employee's base salary for as long as they are legally disabled and cannot return to work.
Some companies don't provide disability coverage but help their employees by giving them the opportunity to purchase coverage on a voluntary basis. With this type of program, employees, rather than the employers, pay the full cost of the coverage.
Important Features
Disability policies have two different protection features that are important to understand.
Non-cancelable means the policy cannot be canceled by the insurance company, except for nonpayment of premiums. This gives you the right to renew the policy every year without an increase in the premium or a reduction in benefits.
Guaranteed renewable gives you the right to renew the policy with the same benefits and not have the policy canceled by the company. However, your insurer has the right to increase your premium as long as it does so for all other policyholders in the same rating class.
The licensed producers at DFA can help you find the best balance of short term and long term disability coverage for your organization. We primarily work with Guardian, LifeWise, Standard Insurance, and UNUM.