Disability Insurance
Group Disability Insurance plans offer employees access to an important benefit that all employees should have. Protecting from loss of income due to illness or accident that causes a disability is critical to protecting the financial future of employee’s and their family. Disability Income Insurance provides monthly income replacement in the event the insured person cannot work due to a covered disability. People ages 33-65 have a 33% chance of becoming disabled and over 54 million Americans are disabled.
When someone is disabled, how will they continue to pay their bills? Mortgage, rent, utilities, food, clothing, school, car payments and other expenses don’t go away when some one becomes disabled.
Employees generally working 30 or more hours per week are considered full time employees and are eligible to participate in Employer sponsored Disability Insurance Plans.
Disability policies should be evaluated by the definitions used to describe each benefit, trigger, payment qualifications and situations in which the coverage may apply. There are many considerations such as Covered Earnings, Benefit Amount, Own Occupation definition, total vs partial disability, short term vs long term, in addition to plan designs that include Cost of Living or Benefit increase options, benefit amounts, benefit periods, elimination periods, definition of disabled, exclusions, recurrent, residual and presumptive disability.
Short Term and Long Term Disability plans are available and can be designed for premiums to be employer paid (mandatory plans requiring 100% eligible employee participation) or voluntary-employee paid (or a combination of employer-employee paid). Rates for mandatory employer paid plans are generally less than voluntary-contributory plans.
An important consideration in providing Disability insurance is the taxation of benefits received should a participant become disabled. If the employer pays all or part of the premium for Disability coverage, the proportionate share of premiums paid is a direct relation to the taxes applying to the benefit received by the employee. For example, if an employer pay 100% of the premium for Long Term Disability Insurance that provides coverage for 65% of covered monthly earnings (subject to maximum monthly amounts) the employee would have to pay ordinary income tax on the benefit received. In this example, depending on the employee’s income tax bracket, after application of Federal and State income taxes, the employee would be left with far less than 65% of their pre-disability earnings. Conversely, if the employee pays the premiums for their Disability insurance through post-tax payroll deductions, any disability benefit would be received tax free.
Covered earnings can include salary, bonuses and/or commissions.
Commonly, Group Disability plans provide for Short-Term Disability Benefits for a 13 week period after a short waiting period depending on whether the Disability is due to Accident or Illness and, Long term Disability plans are designed to pay to age 65 after a 90 day elimination period. Short and Long term Disability plans have maximum weekly (Short term) and maximum monthly (Long term) benefit amounts that are available.
Many Long term Disability plans offer access to Employee Assistance Plans (EAP). An EAP can provide emotional, legal and financial counseling at no additional cost. Travel Assistance including pre-trip information, emergency medical assistance, and emergency personal services provided worldwide may also be included.
In cases where an employee’s covered earnings exceed the maximum Long term Disability benefit; supplemental individual policies should be considered.
Horenberg Insurance is committed to educating our clients and their employees on the options available to them and to assist with the evaluation, selection, implementation and on-going service requirements of plan administrators and plan participants.
Request a Quote for Group Disability Insurance today.
