Find the Best Group Disability Insurance for Your Client
Group disability insurance can be a way for employers to provide significant benefits to current and prospective employees. Disability insurance provides income protection for employees in case an injury or critical illness leaves them unable to work. The features make it an attractive employer benefit.
Offering group disability insurance is a great way to build relationships and trust with your clients. If you work with businesses on their insurance and benefits offerings, consider adding group disability to your portfolio.
What is group disability insurance?
Group disability insurance is a type of insurance policy offered by an employer as a benefit to employees. As with individual disability insurance, group disability insurance supplements income should an employee be deemed unable to work due to injury or illness.
Not all employers offer group disability insurance. Eligibility for an employer’s ability to offer group disability products depends on many factors. The factors include the carrier, the number of employees, and employee classification. The specific employee classifications (for example, administrative or executive) may also affect the level of employee benefits.
Group disability benefits may also be taxable. depending on whether the premium is deducted or not. If the employer is deducting the premium, then it is a taxable benefit. If the employer is not deducting the premium, then it is non-taxable. Alternatively, individual disability insurance is almost always tax-free because it is being paid for with post-tax income. Within the group disability umbrella, there is voluntary coverage and involuntary coverage. Voluntary coverage occurs when the employer provides a platform and plans for their employees, and those employees can choose to enroll in or add on to a plan. With involuntary disability plans, employees are automatically enrolled in a plan after a certain period, and the premiums are employer-paid.
What does group disability typically cover?
Elimination periods, benefit periods, and benefit amounts vary by carrier. The elimination period is the length of time it takes for a policyholder to receive payment after the injury or illness occurs. It is also referred to as a waiting period. The benefit period is the length of time in which a policyholder can file claims for covered disabilities. It is essential to know the details of the policy to determine if the policy meets the coverage needs of your client.
There are two types of group disability policies:
Short Term Disability
Short Term Disability Insurance typically provides 40-70% income protection and usually begins on the first day following the elimination period. It generally lasts for 13-26 weeks. Policy type determines time durations.
Long Term Disability
Long Term Disability Insurance has elimination periods of 90 or 180 days as determined when quoting the product. The length of the elimination period affects the cost of the product.
Many long-term disability plans provide coverage until the age of retirement at 65 to 67 years of age. If needed, a short-term plan can help to provide coverage until a long-term disability plan comes into effect.
How is group disability insurance different from other types of disability insurance?
Group disability policies are different from individual disability policies. Group policies are an employer benefit. Group policies are typically simple to apply for, and there is no underwriting required. Employees who may not have purchased an individual policy can gain coverage through a group policy. Pricing is also generally lower with group policies than individual policies.
There are some disadvantages to group disability. Not all plans are portable, and coverage may not continue if you change jobs. It can also be difficult for claim approval since the definition of a disability can be broad. It is crucial to understand how each carrier defines a disability to determine if the policy is right for your client.
How do I select the best group disability insurance for my client?
Finding the right group disability product for your client depends on their qualifications and needs. Explore other products they may also be interested in and suggest bundling policies by including supplemental benefits, like group disability, alongside group health insurance. Bundling benefits may help sway employers toward choosing a particular provider with whom they can quickly fill out one application for several policies, such as disability, vision, and life insurance.
While you may purchase group disability directly from an insurance company, you might run into some common pitfalls by doing so. It is more difficult to compare policies between different insurance providers, especially since they define qualifying disabilities differently. Do not only look at the price. It is important not to price shop, as the cost is not always reflective of the coverage and benefits offered.
Working with a brokerage agency can help you choose the best group disability policy needs for your client and support you throughout the policy lifetime.
Should I buy group disability insurance through a broker?
Working with a brokerage general agency (BGA) is the best way to avoid the difficulties of trying to purchase a plan on your own. A group disability broker will do the shopping for you and find the best product based on your client’s needs. In addition, brokers have access to multiple carriers and can more easily compare policies from different providers. Brokerages offer these services at no cost to financial advisors because they are compensated directly by insurance carriers. Simply put, a broker can save you time and money while helping you deliver a better result for your client.
How do I find the best group disability insurance broker?
When shopping for group insurance policies, look for brokers who specialize in group benefits. That way you can use them to help you build a portfolio and bundle group policies. A great way to start is by asking your network for referrals. You could also connect with NAIFA, a trusted nonprofit association of insurance brokers and financial advisors.
You can also do your research by prospecting insurance brokerage general agencies in your area. We recommend looking for these qualities in a broker:
- Responsiveness and attentiveness. Are they getting back to you and addressing your questions promptly?
- Product knowledge. Are they knowledgeable of the products and solutions available to serve you and your clients’ needs?
- Back-office support. What happens after an application is submitted? Will they support you after they make the sale?
- A good team instead of just a good salesperson: make sure that the service is as good as the pitch. Service can make or break a relationship.
Frequently asked questions about group disability insurance
What is the definition of disability?
The social security definition of a disability is “the inability to do any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.”
However, each carrier has a different interpretation of what disabilities qualify for compensation. Therefore, each contract will be different, so it is important to read into the policy detail to determine if the plan provides the right coverage for your client.
EMG can help
As a brokerage general agency, EMG Insurance Brokerage handles everything from submission to the commission. Our relationships with over 30 carriers allow us to help choose the best product for your client. We will walk you through the process and help you customize solutions for the unique needs of each client.
We have a dedicated group disability department ready to help you throughout the life of your policy. Whether your client is purchasing a policy for the first time or needs help managing enrollments, we are here to make the process seamless.
Connect with us by phone, online, or in-person and schedule a consultation with your sales director today on how to grow your business.