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Disability Income Insurance

Disability income insurance can help protect an employee’s ability to replace a portion of their income if they become too sick or injured to work. If your employees become disabled, a group long term disability insurance policy can help protect a portion of their income and provide a fundamental layer of security for their financial future.

Offering supplemental individual disability income insurance in addition to a group long term disability plan is one way to provide higher levels of protection for your employees without incurring any additional costs.

Some disability income insurance policies may also help protect your employees’ ability to save for retirement. In the event of a long-term disability, you need to ensure your employees are adequately protected.

Individual, Fully Underwritten Disability Income Insurance

Individual, fully underwritten disability income insurance can be offered to employees to supplement employer-provided group long term disability benefits. Typically, group long term disability benefits cover about half an employee's net monthly income. Employees who have an individually owned disability income insurance policy can protect a larger portion of their income and customize the policy to fit their specific income needs. Individual disability income insurance coverage is non-cancellable to age 65 (provided required premiums are paid), fully portable, and may be available at a discounted rate.

Guaranteed Standard Issue Disability Income Insurance

Guaranteed standard issue disability income insurance is supplemental individual disability income insurance for employees. This coverage may help protect a higher amount of income than a group long-term disability insurance policy alone. Supplemental coverage can help reduce the gap between current earnings and benefits available through a group long-term disability insurance policy.

Advantages to employees:

  • Designed to replace a higher percentage of income when eligible for benefits under both policies
  • Covers a portion of bonus and incentive compensation

Advantages to employers:

  • Enriches employee offerings at no cost to employers
  • Allows for easy implementation

Disability income insurance policies have exclusions and limitations.

Note: There may be implications under the Employment Retirement Income Security Act (“ERISA”) depending on how disability income insurance policies are made available to the employees and whether such an arrangement constitutes an “employee benefit plan” under ERISA. Employers should consult their own tax and legal advisors for further information on potential ERISA implications.