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Group Disability provides employees with replacement income if he/she is not able to work due to an illness or injury.  For example, if an employee is recovering at home after surgery, the employee may be able to receive a benefit (typically 60-66% of his/her pre-disability income) due to his/her inability to work.

Group Disability has two parts; Short-Term Disability (STD) and Long-Term Disability (LTD).  These plans can be implemented independently, but are usually purchased together.  STD provides replacement income for a finite period of time following the onset of the disability (may be after a waiting period).  The common duration (typical length of time STD pays a benefit not counting the waiting period) is 12 weeks from the time the disability occurs.  If a disability continues beyond 12 weeks, an LTD policy will continue to pay a benefit without a break in coverage.  The LTD policy can fully pay a disabled employee until age 65 when he or she will be eligible for social security.  Benefit schedule beyond the age of 65 varies based on the contract.

Assessment Questions

  • Do you update your employees’ salaries regularly with your disability carriers  If an employee becomes disabled, the benefit will be based on the last salary reported to the disability carrier.


  • Does your disability policy provide 8 weeks for a C-section birth?  Although 8 weeks was the norm, many carriers are now offering only 6 weeks.  You broker needs to request 8 weeks.


  • Does your contract provide the maximum benefit based on your salaries?  Although your contract may say the benefit is 60 or 66% of pre-disability earnings, the benefit may be lower due to the cap on the maximum benefit for the higher earners.


  • Is your company an S Corp or LLC?  If yes, the owners should have a “gross-up” contract since they should be paying taxes on the premiums the company pays on their behalf.  Has your broker ever discussed gross-up contracts with you?


  • Does your contract include a 40-hour work week clause?  If yes and you have an owner who works more than 40 hours a week, there may be no/or a reduced disability benefit if the disability still allows the owner to work 40 hours a week.


  • Does your contract include a “prudent person” clause?  This clause may prevent the insurance company from paying a claim as expected if the circumstances subjectively say the disabled person should have seen a doctor to treat a prior condition before it caused the disability.


  • Does your contract include a “maximum capacity” clause?  This clause may prevent the insurance company from paying a claim if your doctor makes a subjective judgment that you are able to work more than you think you can.


  • Do you and your employees know how disability policies work?  Are you aware of the pre-existing condition rules, the return to work incentive, partial disability, own-occupation period, any-occupation period, or trial work days?

For mo
re information, please contact Bridgeport Benefit Advisors.

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The material on this page is intended as general descriptions of the concepts presented.  It is for educational purposes only and it not intended to provide specific financial or tax advice.  These descriptions cannot take into account your specific conditions and situation including the data required for underwriting purposes, financial circumstances, risk tolerance, and other factors.