Employee Life and Disability Insurance

Disability Insurance Basics

Disability insurance is a complicated subject. Policies vary, but the basics remain the same.

Monthly benefit amounts are fixed in most disability policies. But it may be possible to buy additional coverage.

How does a disability insurance policy define disability?

This is an important question. Here are the typical classifications: “Own occ” is “own occupation” meaning the insured cannot carry out the tasks required by their vocation. “Any occ” is “any occupation” and means that they cannot carry out the tasks required by any type of occupation for which they are qualified. The third classification is “combination” and this refers to a rule some policies have that utilizes the ‘own occupation for the first two years, and thereafter have an ‘any occupation’ provision which will lower the premium.

When do disability benefits begin?

Waiting periods can range anywhere from 1 week to 2 years. The waiting period can have a big effect on your financial situation, so be familiar with your policy and take note: a longer waiting period usually means a less expensive disability insurance policy.

How long do monthly benefits last once payments begin?

Benefit periods vary immensely. They range from 6 months to life, depending on the disability, what a company is willing to offer in a group plan, and what the insurance company is willing to cover.

Group Disability Insurance

Does your employer offer disability insurance?

Unfortunately, employer-provided disability insurance is far less common than employer-provided life insurance. According to the Bureau of Labor Statistics, approximately 30% of employees have employer-provided disability policies.

An employer-provided disability insurance plan is a great benefit! Group coverage is considerably cheaper than individual coverage. Employers may cover a portion of, or the entire disability insurance premium.

Sufficient disability insurance should replace at least 50-60% of working income, pay benefits until age 65, and have a waiting period that is compatible with a person’s financial means.

If the employer-provided disability insurance doesn't provide each of these components, coverage probably isn't sufficient. In this case, the employee can opt to purchase individual long-term disability insurance to supplement the employer-provided plan.

For more research on employer-provided life and disability benefits, there are various benefit surveys that are available in the marketplace.