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.
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.
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.