Offering employee benefits is crucial for small businesses looking to attract and retain top talent. While most businesses focus on perks such as health coverage, 401(k) matching, and wellness benefits, one area that’s often overlooked is group disability insurance.
Since budgets and cost-saving measures are always on top-of mind for small businesses, you may be asking yourself— is group disability insurance actually necessary for my team?
To help answer this question, let’s take a look at the purpose of group disability coverage, how it works and and whether or not it’s worth the investment.
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What is Group Disability Insurance?
Group disability insurance coverage works by replacing a portion of an employee’s income who isn’t able to work due to a non-work-related injury or sickness. Hence the name “Group Disability Insurance,” like group health or group life insurance, it’s typically offered by employers and covers multiple employees under a single policy. All in all, these policies provide workers with much needed financial support while they are recovering, so they can pay for medical bills, and support their families and lifestyle.
Types of Group Disability Insurance
There are two main types of disability insurance that employers can offer, or employers can choose to offer both. These include:
- Short-Term Disability Insurance (STD): Coverage usually lasts for as little as a few weeks, up to 3 or 6 months on the higher end. The specific length of coverage that short-term disability offers depends on the policy.
- Long-Term Disability Insurance (LTD): If offered, long-term disability works by kicking in after the short-term benefits end. The coverage for long-term policies can last for multiple years, or up until retirement age. Again, the specific length of coverage depends on the policy at hand.
While both types of policy serve their own purpose, it’s important to note that more employers offering group disability insurance more commonly provide short-term coverage. Long-term disability is usually purchased on an individual basis to supplement short-term group coverage, and tends to be more expensive.
How Does it Work? 
If an employee suffers a qualifying disability, they first need to submit a claim to the insurance provider. After the claim is submitted, there is typically a “waiting period” that lasts anywhere from a few days to a few weeks.
Once the waiting period is over, the disability plan starts to pay the affected employee a percentage of their salary. This percentage generally ranges from between 40% to 70%, and is paid until they recover and return to work, or until the benefit period ends (whichever occurs first).
While the premium costs of providing group disability insurance are usually paid by employers, businesses can also offer it as a voluntary benefit. In the case of voluntary benefits, employees can choose to opt in if they wish, and the cost is deducted from their pay.
What Does it Cover?
Group disability insurance generally covers a wide-range of non-work-related illnesses and injuries. These include:
- Illnesses: Including cancer, chronic conditions, complications from surgery and more.
- Injuries: Including accidents and musculoskeletal disorders.
- Pregnancy and Childbirth Recovery: While these aren’t considered disabilities, some policies provide pay to women who experience complications or need extended recovery time after delivery.
While the above are simply general outlines of what is typically covered, to get a full list of covered illnesses and injuries consult the Social Security Administration’s (SSA) “Listing of Impairments” also known as the “Blue Book.”
Lastly, it’s important to note that group disability does not provide employees with pay for injuries or illnesses that occur due to work-related causes. For work-related injuries and illnesses, a workers’ compensation policy is necessary to provide employees with payment during their time off. To fully understand the difference between the two types of coverage read, our article, “Workers’ Compensation vs. Disability Insurance.”
Is Group Disability Insurance Required by Law for Businesses?
Generally speaking, businesses are not required by law to provide disability insurance to their employees, but there are some exceptions. There are a handful of states that require employers to provide short-term disability benefits. These states are:
- California
- Hawaii
- New Jersey
- New York
- Rhode Island
Why Group Disability Insurance Matters for Small Businesses
Without our employees, our companies wouldn’t be able to operate efficiently. While paying employees fair wages for the duties they perform is an important motivating and recruiting factor, it may not be enough if they are forced to take time off due to an unforeseen injury or illness.
Providing group disability insurance not only shows your employees that you care about their well-being, but it also provides peace of mind that they won’t have to worry if they get hurt or sick outside of the workplace.
If you’re still up in the air about providing group disability benefits for your team, consider the following:
- A policy enhances your overall benefits package at a low cost (most employers pay only $.15 per employee, per hour worked).
- Employee morale and satisfaction is increased when offering disability insurance.
- Employees are less likely to leave a company that offers a well-rounded benefits package that includes disability.
- If an employee with disability insurance is injured, they’ll likely be able to return to work faster, since they can afford better care.
- Offering disability insurance levels the playing field with larger organizations who usually always provide it.
How To Get Group Disability Insurance
The decision whether or not to provide your team with group disability insurance may depend on several factors like your business size, budget and overall goals. While it’s ultimately up to you to determine if your business needs group disability or not, one thing’s for certain— it’s a smart move, and usually very affordable.
Every employer wants to instill a positive company culture, but it shouldn’t just be in the office, it should extend into the personal lives of employees, and offering group disability coverage is a great way to do just that.
If you’re interested in finding out how much a disability insurance plan might cost for your team, or simply want to learn more, Group-Health-Quotes (GHQ) is here to help! Our user-friendly platform makes it easy to compare plans side by side, receive free, no-obligation quotes, and talk to trusted insurance agents at your convenience.
To get started, just enter your ZIP code in the box to the right, or give us a call at (888)-571-0291 today!
