Group and Individual Disability Insurance Plans

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Group and Individual Disability Insurance Plans

Many employers provide short- and long-term disability insurance to their employees. Some provide long-term but not short-term coverage. Either the employer pays the entire premium or part of the premium with the employee picking up the rest. In some cases, employers offer basic coverage and give employees the chance to pay for additional coverage at a group rate. Group rates are discounted rates offered by insurance companies to large groups and employers. Generally, it is much more affordable to participate in employer group rate disability insurance than individual disability insurance.

When the policy kicks in

If you have disability insurance through your employer, the policy will kick in under certain conditions established between your employer and its insurer. For a short-term disability, you usually have to be out of work for at least a day or up to seven days before benefits kick in. If you have them, you can use sick days to fill in this gap before short-term disability benefits are available. While sick day pay is generally at your regular pay rate, short-term disability pay rates are lower and may not come on the same schedule as your paycheck. You may have to check in with your doctor weekly and report back to your employer if your disability continues beyond a week or two.

Individual disability policies

Individual disability policies are those that you purchase directly from an insurer. Insurers will generally require you to pass a physical and disclose any health conditions that may affect your ability to work. Individual disability policies offer a range of benefits and options, including the level of benefits available, the waiting period before benefits are available, and ability to renew the policy. The more generous the benefits and terms, the higher the monthly premium will likely be.

Policy overlap

Short-term and long-term disability policies are usually purchased separately, although benefits should be coordinated so that the policies don’t overlap. Most policies cover both on-the-job and off-the-job accidents and illnesses. Insurers generally offer coverage only up to age 65, when Social Security benefits kick in and require you to apply for Social Security disability insurance if your disability is severe enough.