Group Disability Income

Group Disability Income

  • provides income while life insured is unable to work due to illness or accident
  • two types:
    1. Short Term Disability
    2. Long Term Disability
  • definition of disability
    • very different from the definition for individual disability income
    • benefit provided if meet "own occupation" definition of total disability, but this definition is like the "regular occupation" for individual DI for Long Term Disability
  • while benefits are paid, the insurer assesses the disability on an ongoing basis looking at
    • opportunities for retraining based on education and experience
    • medical condition
    • goal is to return the life insured to the pre-disability level of earnings

Short Term Disability (STD)

  • also called "weekly income benefit"
  • accident: benefits begin on the first day
  • sickness: benefits begin on the 8th day
  • benefit period: up to 2 years
  • benefit: 60% or 66 2/3% of predisability income
    • taxable since the employer pays at least 50% of the premium
    • tax-free in proportion of the premium paid by the employee

Long Term Disability (LTD)

  • benefits start after Short Term Disability ends
  • benefit period: 2 years, 5 years, to age 65
  • definition of disability
    • unable to work at own occupation during initial two years
    • unable to work at any occupation for which qualified thereafter
  • benefit
    • employer-paid: 60% of predisability income
    • employee-paid: 75% of predisability income
  • premiums: the better if the employee pays
    • benefits are then tax-free
    • less-expensive than individual coverage

Coordination of Benefits

  • limits the maximum allowable replacement income so that an incentive remains to return to work
  • sources of disability income:
    • private disability plans (group or individual)
    • government disability plans
    • other earnings (excluding investment earnings)
  • the benefits reduce when the maximum is reached


Benefits are not paid if

  • not under a doctor's care
  • absent due to normal pregnancy or parental leave
  • in jail
  • self-inflicted injuries
  • suicide attempt (sane or insane)
  • resulting from war
  • while committing a criminal act

While receiving partial disability or rehabilitation benefits, benefits are denied if

  • the employee works elsewhere without permission of the insurer
  • the employee refuses to participate in an approved partial disability or rehabilitation program as the insurer requires

Pre-Existing Conditions

  • total disability during the first 12 months of coverage when the insured received
    • medical treatment within 90 days of the start of coverage for the cause of the disability, or
    • prescription drugs for the cause of disability within 90 days of coverage


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