Disability: What You Need to Know

If someone receives group health insurance through an employer, FMLA is the framework in which an employee's job (and their health insurance) is protected if they need to take time off to a serious illness. This also pertains to having to take leave due to the illness of an immediate family member or child. FMLA is an UNPAID leave of absence.¹

Compensating for lost income

Employer-sponsored group disability insurance is what compensates employees for lost income if an employee cannot work for an extended amount of time. However, this is not designed for short-term illness. From personal experience leading various HR departments, immediate and short periods of absence for illness are meant to be covered by a Paid Time Off (PTO) benefit.

Group disability insurance

What is group disability insurance through an employer? What does it cover and who is eligible? That is what will be covered in this post. There is more information online, and you can always ask your company's HR department for further information.

Also, anyone can take out disability insurance independent of employment or their employer, but that is not discussed here. You can talk with an insurance broker if you are interested in learning more about independent disability insurance.

Types of disability insurance

There are two types - short term (STD) which can transition into long term disability (LTD). As a friendly reminder again, keep in mind that possessing short term disability insurance does not offer job protection; that is covered by the Families Medical Leave Act or FMLA (discussed in a previous article: 'FMLA: What You Need to Know') and the American with Disabilities Act or ADA (which will be discussed in a later post).¹

Employer factors

The length of short-term and long-term disability, as well as elimination periods, preexisting condition exclusions, etc. is not uniform across employers. It is entirely up to the employer to decide if this is a benefit they want to offer and the specifics of the plan they choose. If you would like more information on your companies plans - talk to HR and/or ask for the Summary Plan Description. If you are in the interview phase HR can provide a benefits summary for you as well.

You do not have to disclose your health care condition to ask for this; from personal experience, it is fairly common for employees to want to know what benefits a company offers because it is a part of the total compensation package. Remember that phrase - 'total compensation package!'

So, as mentioned above, if your employer (or potential employer) offers it, what is the cost? Again, no across-the-board answer. From personal experience as an HR professional, some employers cover it 100% (do not require a payroll deduction should employees choose to enroll) and others require a contribution by the employee in the form of a payroll deduction. Again, ask your HR department for further information.

What does group disability pay out?

What does group disability pay out should you use it? Unfortunately, it is not 100%. The averages are around 40%-70% for short-term disability and 60%-80% of lost wages for long term disability. Whoever handles human resources at your company should be able to explain in further detail.

Unfortunately disability insurance does not offer 100% payout; however, medical debt is the leading cause of bankruptcies in the US. Should you find yourself in the situation that you cannot work for an extended period, disability insurance is what covers a portion of your lost income.³

I hope this information helps! I realize that the world of employer sponsored benefits can be quite tricky and overwhelming. You can always ask your HR representative for specific information, a summary of benefits, or the Summary Plan Description for further information.

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