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What to know about group disability insurance

Group disability insurance just describes a policy you get through work or another organization. Even if you have group disability insurance, you may still need your own long-term disability policy.

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Andrew HurstSenior Editor & Licensed Auto Insurance ExpertAndrew Hurst is a senior editor and a licensed auto insurance expert at Policygenius. His work has also been featured in The New York Times, The Wall Street Journal, Forbes, USA Today, NPR, Mic, Insurance Business Magazine, ValuePenguin, and Property Casualty 360.

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Anna SwartzAnna SwartzSenior Managing EditorAnna Swartz is a senior managing editor who specializes in home, auto, renters, and disability insurance at Policygenius. Previously, she was a senior staff writer at Mic and a writer at The Dodo. Her work has also appeared in Salon, HuffPost, MSN, AOL, and Heeb.
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Patrick Hanzel, CFP®Patrick Hanzel, CFP®Certified Financial Planner™ & Advanced Planning ManagerPatrick Hanzel, CFP®, is a certified financial planner and advanced planning manager at Policygenius. His expertise has been featured at Lifehacker, Consumer Affairs, Authority Magazine, Thrive Global, and Fatherly.

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Group disability insurance is usually offered as a work perk, often partially or fully paid for by your employer. Just like any other kind of disability insurance, it replaces some of your income if an injury or illness keeps you out of work.

Key takeaways

  • Group disability insurance works like any other kind of disability insurance, it pays out if you can’t work because of an injury or illness.

  • Your employer may offer short-term or long-term group coverage, but short-term coverage is more common.

  • Group disability insurance is more affordable than a private policy since its cost is usually partially or fully covered by your employer.

  • But group disability insurance offers more limited coverage than a personal long-term disability insurance policy, so you should consider having both.

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What is group disability insurance?

Think of disability insurance as income protection insurance. Group disability insurance works like other types of disability insurance: if you’re hurt or injured and can’t work, you file a claim and receive payouts that replace your income until you can go back to your job.

The difference is that group disability insurance is offered as an employee benefit, and you opt in just like you do with other work benefits.

With group disability insurance, your employer sets the terms of the policy. You may be able to pay extra for more coverage, but the disability policy is tied to your job, and, just like employer-sponsored health insurance, you lose it when you leave the job.

Your employer may offer short-term or long-term disability insurance (or even both) as group benefits, though group disability insurance is usually short-term.

  • Short-term disability insurance: Covers disabilities that last between 3 and 6 months, sometimes up to a year, with a waiting period of 0 to 30 days.

  • Long-term disability insurance: Covers you for at least a year, but may provide benefits for decades or even through retirement age, typically has a waiting period of 90 days or more.

What does group disability insurance cover?

Group disability insurance covers a range of injuries or illnesses that might keep you out of work for a few months, these will be defined in your policy as “disabling conditions.” They may include:

  • Anxiety or depression

  • Broken bones or injuries after an accident

  • Cancer

  • Arthritis or chronic pain

You should check your policy’s details to be sure that your condition isn’t excluded from coverage, since not everything will qualify, and every policy is different. Any pre-existing conditions will typically be excluded. For example if you have an existing back injury when you sign up for group disability insurance, you can’t then file a claim even if the back injury is keeping you from working.

Is it worth getting group disability insurance?

Yes, you should opt-in to group disability insurance if it’s offered since it’s an affordable way to protect your income. And most group disability insurance is what’s called guaranteed issue, meaning you don’t have to take a medical exam to get coverage.

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Group vs. individual disability insurance

Group disability insurance is offered by an employer or through another organization, while individual or personal disability insurance is a policy you seek out and buy for yourself like auto insurance.

An individual disability insurance policy will probably cost more than a group policy, but individual disability insurance offers better protection.

  • You have more control: You control how much of your income a personal policy will cover, along with other details like your waiting period, add-ons or riders, and more.

  • Benefits aren’t taxed: Group disability insurance benefits are taxable since you’ll pay for a policy with pre-tax dollars, but this isn’t true for an individual policy.

  • Coverage isn’t tied to your job: Individual disability insurance follows you, not your job, so you can keep it through any career changes.

That’s why you shouldn’t rely on group disability insurance as your only financial protection from an unexpected injury or illness.

Using group and personal disability insurance together

One of the best ways to use group disability insurance is by pairing it with an individual policy.

Let’s say you have your own long-term disability insurance policy in addition to short-term group disability insurance through work. If you’re hurt in an accident and need to take time off of work, you can actually use both policies back to back.

Ideally you’d collect short-term benefits from your group plan almost immediately while you wait to start receiving benefits from your long-term policy.

Pairing your policies this way lets you cover any gaps and avoid using your savings while you wait until you can use your long-term benefits. You can also use a supplemental disability insurance policy to get even more coverage.

How does group disability insurance work?

It works just like any other disability insurance, if you’re hurt or sick and can’t work, you can submit a claim and start receiving payments once your policy’s waiting period is up — if you’re able to return to work before the waiting period finishes, you won’t receive any benefits.

Short-term policies typically pay out weekly, while long-term coverage pays once a month.

Don’t expect group disability insurance to cover your entire salary if you’re out of work. "Due to the benefit from employer-provided coverage being taxed as income, a policy that covers 60% of your salary could actually feel more like 35% to 40%,” says Patrick Hanzel, certified financial planner and Advanced Planning Team Lead at Policygenius.

If you’re eligible for another kind of disability assistance, like workers’ compensation, coverage through your state, or Social Security disability benefits, these can help add to your group disability benefits.

What happens to your health insurance while you get benefits?

If both your health insurance and your group disability insurance are through your job, you’ll hold on to your health insurance while you’re receiving benefits from the group coverage. If you lose your job, you’ll lose both your health insurance and your group disability coverage.

If you have your own long-term disability policy, it’s not related to your health insurance at all. As long as you have active health insurance, either through your job or a spouse or partner’s job or any other channel, you’ll keep your health insurance coverage while you receive disability benefits. 

→ Read more about health insurance and disability leave

Where else to get group disability insurance 

Professional organizations, labor unions, and social groups also offer group disability insurance to members.

These policies work just like employer-sponsored policies, except that you keep the policy as long as you stay a member of your organization and benefits may be tailored to the needs of your group’s members.

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Frequently asked questions

What is group disability income insurance?

Group disability insurance is a type of coverage offered by your employer that usually replaces up to 60% of your income — minus any taxes you pay on your benefits — if you become disabled and can’t work.

How much does group disability insurance cost?

The cost of group disability insurance depends on how much of your premiums your employer covers. That said, group insurance is usually much more affordable than a personal policy.

Is group disability insurance tax deductible?

Group disability insurance premiums are tax deductible for employers, but not for employees.

What’s the difference between group disability and health insurance?

Health insurance covers medical costs like hospital stays, operations, and check-ups. Disability insurance can cover any expenses, not just health care, and the payments go straight to you, just like a normal paycheck.

Which insurance companies pay the best group disability benefits?

Insurance companies don’t decide the size of your benefit or the other perks you get, your employer does.

Author

Andrew Hurst is a senior editor and a licensed auto insurance expert at Policygenius. His work has also been featured in The New York Times, The Wall Street Journal, Forbes, USA Today, NPR, Mic, Insurance Business Magazine, ValuePenguin, and Property Casualty 360.

Editor

Anna Swartz is a senior managing editor who specializes in home, auto, renters, and disability insurance at Policygenius. Previously, she was a senior staff writer at Mic and a writer at The Dodo. Her work has also appeared in Salon, HuffPost, MSN, AOL, and Heeb.

Expert reviewer

Patrick Hanzel, CFP®, is a certified financial planner and advanced planning manager at Policygenius. His expertise has been featured at Lifehacker, Consumer Affairs, Authority Magazine, Thrive Global, and Fatherly.

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