Disability Insurance
Most families and individuals are highly dependent on their earned income both to pay for today's lifestyle as well as save for the future they wish to create. An Illness or injury of a breadwinner can cause a significant disruption of cash flow that places all that these families and individuals value in jeopardy. Disability insurance is often overlooked or misunderstood but is a very important piece to consider as part of a complete protection plan. Whereas health insurance is designed to help pay for the actual expense associated with illness or injury, disability insurance is designed to replace a significant portion of the earned income lost when a wage earner is unable to work due to an illness or injury.
Short-Term Disability Insurance
- Group Short-Term Disability Insurance - Offered as part of a benefits program through an individual's employer. As such, it is not portable when one leaves employment. Typically available with little or no health underwriting. Covers 50-80% of an employee's earnings. Often premiums are paid by the employer entirely or in part. When this is true benefits become taxable. Begins paying benefits after an elimination period chosen by the employer of 0 to 14 days and typically pays out for a benefit period also chosen by an employer between 6 months up to 2 years.
- Individual Short-Term Disability Insurance* - Purchased by an individual directly from an insurance carrier. Qualification for coverage is usually subject to medical, occupational and financial underwriting. Typically an individual can choose to protect 50-80% of their earnings. Premiums are paid with after-tax dollars and benefits are typically tax-free. An individual is able to choose their desired elimination period (0-14 days) and benefit period (6 months to 2 years) based on their preferences and desired premium cost.
Long-Term Disability Insurance
- Group Long-Term Disability Insurance - Offered as part of a benefits program through an individual's employer. Typically available with little or no health underwriting. Covers 50-60% of an employee's eligible earnings. Often, premiums are paid by the employer entirely or in part. When this is true benefits become taxable. Payment of benefits usually begins after an employer-chosen elimination period between 90 and 180 days and can be paid out for a benefit period up to age 65. Typically does not cover earnings such as commissions or bonuses and is subject to benefit caps that reduce protection available to individuals with higher income. Provides a foundation of cost-effective income protection but lacks flexibility and potential customization and is not able to be continued when employment is terminated.
- Individual Long-Term Disability Insurance - Purchased by an individual directly from an insurance carrier. Qualification for coverage is usually subject to medical, occupational, and financial underwriting. Premiums are paid with after-tax dollars and benefits are typically tax-free. Offers flexibility and customization to an individual's situation by allowing choice of plan design regarding waiting and benefit periods and through a variety of policy riders. Benefits begin after an elimination period chosen by the individual between 30 days and 1 year and can pay out over a benefit period also chosen by the individual ranging between 2 years and age 70. Can stand alone for individuals not offered group long-term disability or may be layered on top of group coverage to help individuals more completely protect their incomes.
- Disability Insurance for Retirement Savings - Typically purchased on an individual basis. Designed to protect an individual's ongoing savings into qualified retirement plans in the event that they are unable to work and continue funding these accounts either temporarily or permanently.
*Guardian and its subsidiaries do not offer this product.