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.
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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.
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- 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.
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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?
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For more information, please contact Bridgeport Benefit Advisors.
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