Group Disability ***
Group vs Individual Disability Income Plans
- Group disability - pays a percentage of salary/usually no underwriting
- Individual Disability - pays a flat/stated amount/ underwriting required
- Group Short term disability - 13 to 26 weeks
- Group Long Term disability - longer than two years
- Group Disability - premiums tax deductible - benefits are taxable
- Individual Disability - premiums NOT tax deductible - benefits are tax free
Individual disability plans specify a flat income amount.
MR. WATSON: You have a $50,000 salary. You buy a $5,000-a-month disability policy. Agree?
MR. WATSON: Years down the road you are making $500,000. If you become disabled, how much are you going to get? $5,000. It doesn't go up unless you buy more. Agree?
ALL: Yes.
MR. WATSON: You guys remember that?
WOMAN: I'm with you.
MR. WATSON: "Individual plans usually specify a flat income amount based on your earnings", "determined" (past tense) "at the time the policy is purchased. In contrast, group plans just specify benefits as a percentage of salary." Look here. Let's just say they are going to give you 60 percent of your salary. Right now you are making $100,000. If you become disabled with a group policy you would get 60 percent of that. You agree?
ALL: Yes.
MR. WATSON: Five years from now you're making $500,000 and you become disabled. How much are you going to get with group insurance? 60 percent of the $500,000. Make sense? So group is expressed as a percentage of your salary. Understand?
MR. WATSON: You have group long-term. You have group short-term. Which one will pay you a higher percentage of your salary? Group long-term or group short-term? Group short-term would. Woman gets pregnant, has a baby. She might be able to get 100% of her salary for 26 weeks as opposed to 60% of her salary for 52 weeks. Make sense?
ALL: Um-hmm.
MR. WATSON: Group short-term may be 13 to 26 weeks, pay anywhere from 50 to 100 percent of your salary. Long-term is normally 60 percent of your salary, longer than two years, maybe to retirement age.
MR. WATSON: Most group plans will make the group disability benefits supplemental to worker's compensation to limit the total benefits, so as to not to exceed a certain percentage of the worker's salary.
WOMAN: Yeah. They don't want you getting more while you're disabled than when you were working.
MR. WATSON: Yep! And, they may only pay for non-occupational disabilities because worker's compensation pays for on the job disabilities.
MR. WATSON: Also, group disability plans do not require an exam or any health questions. Individual plans are subject to underwriting by the insurance company. But, with group, the employee may have to wait for 30, 60, or 90 days to enroll.
Group AD&D (accidental death and dismemberment)
MR. WATSON: Same as individual A.D. & D., but available for groups.
MR. WATSON: Amount paid for accidental death is what? Principal Sum. Need a named beneficiary.
MR. WATSON: Amount paid for loss of body part? Capital sum.
MR. WATSON: Accidental means, accidental results-which one is more limiting?
ALL: Means.