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What is group disability insurance?

SUMMARY

Talking about disability is not easy for anyone, especially those at the peak of their earning years who considered themselves to be truly invincible. However, a disability can sneak up on anyone at any time. So it’s best to stay prepared. Employers can help their employees do just that by offering a group disability insurance plan.

IN THIS ARTICLE

Physical disability can be an uncomfortable topic of discussion for anyone. More so for people in their prime earning years who are oblivious to the dangers of a physical disability. As per the Canadian Survey on Disability (CSD), 1 in 7 Canadians identify as having a disability and 33 percent of workers aged between 30-64 are likely to experience some kind of disability for more than 90 days—this makes group disability insurance an important employee benefit. 

Employers who value their employees will also want to protect their physical well-being. Group disability insurance helps in doing just that. 

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What is group disability insurance?

Group disability insurance is a financial safety net for your employees if they are unable to work due to a non-job related disability. An employee with group disability benefits will receive a portion of their income during this difficult time so they can focus on getting better. 

Most insurers replace a certain percentage of an employee’s regular income. Depending on the group disability plan, the benefit amount is paid on a weekly or monthly basis. Typically, an employee will receive group disability benefits until they have recovered and resumed working. 

Types of group disability insurance coverage

There are two types of group disability plans:

  • Short-term disability (STD)
  • Long-term disability (LTD)

Group short-term disability benefits

When we talk about disability, we usually think of things like paralysis, cancer, or a serious injury. However, there are certain conditions for which recovery might take anywhere between 15-26 weeks. These are the conditions that are covered under a short-term disability insurance plan. 

While the definition of disability and the coverage options can vary from one insurer to another, most group disability insurance plans cover the following common issues:

  • Mental health struggles 
  • Recovery from an accident
  • Recovery from a major surgery
  • Hospitalization or at-home recovery from illnesses 

Group long-term disability benefits

Long-term group disability benefits replace an employee’s income if they are unable to work due to a major illness, accident, or injury. Depending on the plan that is being offered, long-term group health insurance benefits can replace employee incomes up to the age of 65. 

Similar to how short-term plans work, group long-term disability insurance coverage varies depending on the plan and the insurer. Most long-term group disability plans will typically cover:

  • Cancer related disabilities
  • Severe mental health disorders such as bipolar disorder
  • Musculoskeletal issues 
  • Serious injuries 
  • Major surgeries 

Are both long- and short-term group disability benefits necessary?

Most group disability plans cover LTDs but not STDs. This is mostly due to budgets and priorities. In our opinion, this also often makes sense. Many short-term disabilities can be covered under a group health plan or employment insurance which is a mandatory employee benefit. So if employers choose not to offer STDs that is okay. 

LTDs on the other hand are very important. Any employee who is unable to work for a longer period of time due to a disability will need all the help that they can get. An STD will help them and their loved ones deal with any financial issues while the disabled employee can focus on rehabilitation. 

Know more about how group health benefits work

What is the definition of disability for an employee benefits plan?

Disability by itself is a broad term. It can mean anything from cancer to a pregnancy, a stroke, or a bone fracture. In fact in Canada, alcoholism and drug addiction is also considered to be a disability that requires rehabilitation. 

Understanding what constitutes a disability in a group benefits plan is important for both employers and employees. Different insurers can define disability in different ways. However, most definitions are divided into two major parts—inability to perform regular job duties or occupation and inability to get gainful employment.

Regular job duties or occupation means an employee will get group disability insurance benefits if they are unable to perform the core or essential duties and responsibilities of a job or occupation their employer had hired them for. 

Gainful employment covers employees whose illness or injury prevents them from performing any of the roles and responsibilities that they are reasonably suited to perform.

Any employee who falls under either of these categories will be eligible for group disability insurance benefits. 

What conditions are not considered as a disability?

The inability to work due to any major illness, injury, or accident is considered to be a disability and can be covered under employee benefits plans. But there are conditions that simply do not qualify as a disability. Some of these are:

  • Sprains
  • Concussions 
  • Appendicitis 
  • Common colds and flu
  • Broken limbs 
  • And other common illnesses and injuries

These conditions are not covered in group or individual disability insurance plans.

Should employers offer group disability benefits?

Group disability insurance is not a mandatory employee benefit. That being said, any employer who wants to hire and retain top talent should consider adding this to their group health benefits plan. A group disability insurance plan shows that an employer truly values and cares for their employees during the latter’s most difficult time. 

Building a group disability benefits plan

We know it’s not easy for anyone to discuss disability. But the statistics are stacked against us and with an increasing number of Canadians who are facing disability issues, it’s time to have a real conversation about it. 

Our licensed advisors help employers build group benefits plans that will meet the organization’s budget and coverage needs of the employees. Speak to us today, answer a few simple questions about your business, and we’ll help build a plan for you and your employees. 

Frequently Asked Questions

Why group disability insurance?

A disability can prevent an employee from performing a job for a short or long period of time. Group disability insurance can replace the employee’s income for that duration so they can focus on getting better and returning to work.

How does disability insurance work in Canada?

Most insurers in Canada replace a certain percentage of an employee’s wages during the length of the disability. Depending on the group disability insurance plan, the benefit amount is paid on a weekly or monthly basis. Typically, an employee will receive group disability benefits until they have recovered and resumed working. 

Is group disability insurance a taxable benefit?

If an employer pays all or part of a group disability insurance premium, then it will be a taxable benefit for the employee. However, if the premiums were paid by the employee through pay cheque deductions, it will not be a taxable benefit. 

What is group long term disability insurance?

Long-term group disability benefits replace an employee’s income if they are unable to work due to a major illness, accident, or injury. Depending on the plan that is being offered, long-term group health insurance benefits can replace employee incomes up to the age of 65. 

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Call us at 1-888-601-9980 or book time with our licensed experts.
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KEY TAKEAWAYS

  • 1 in 7 Canadians identify as having a disability and 33 percent of workers aged between 30-64 are likely to experience some kind of disability for more than 90 days
  • Group disability insurance is a financial safety net for your employees if they are unable to work due to a non-job related disability
  • There are two types of group disability plans: Short-term disability(STD) and Long-term disability (LTD)
  • Understanding what constitutes a disability in a group benefits plan is important for both employers and employees
  • Most insurers divide the definition of disability into two major parts—inability to perform regular job duties or occupation and inability to get gainful employment

By Jiten Puri
CEO & Founder, Insurance Advisor, LLQP
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