Long Term vs. Short Term Disability in a group plan

Long Term Disability in a Group Plan
Group disability plans typically provide the totally disabled employee with up to 60 percent of pre-disability income to a specified maximum. Coverage is available for both short and long term disabilities and often without medical evidence of insurability. Group disability insurance helps attract and retain quality employees and is tax deductible to the business.
Drawbacks to a group disability insurance policy include:

  • Total disability definition. Most group policies require you to be totally disabled to receive benefits.
  • Taxable. If the employer is paying the premiums, the benefits are taxable to you. This diminishes the amount of benefit you take home
  • Benefits can be cancelled by employer
  • Benefits are not transferable if you leave your employer
  • Benefit amounts are capped
  • It is important to consider supplementing your group policy with an individual policy. This will provide you with coverage that is portable, more specific to your occupation and will increase your overall benefit.

Most Long term disability plans are own occupation definition for the first two years, which refers to the ability to perform the main functions of one’s regular job. After two years, any occupation definition applies, which refers to the ability to perform the main functions of any job for which one is suited by training and experience.

Short Term Disability in a Group Plan
Short Term disability is a temporary inability to perform one’s Job. Most plans have 24 hour-a-day coverage but some only cover disabilities off the job. A 17 week benefit period is normal since this matches the E.I. term (15 weeks of coverage plus 2 weeks of waiting period).

Employer E. I. Premiums are lower if the employee is not claiming under E.I. Most Plans pay a taxable benefit to the employee equal to 100% of his or her regular pre disability salary.