Group insurance is an insurance that covers a group of people, usually who are the members of societies, employees of a common employer, or professionals in a common group.
Group insurance may or may not be converted to individual coverage. As group insurance gets big business for an insurance company with minimum operational expenses (under one master policy issued to an employer, union or any recognized group), it is usually less expensive than individual policies.
Group coverage can help reduce the problem of adverse selection by creating a pool of people eligible to purchase insurance who belong to the group for reasons other than for the purposes of obtaining insurance. In other words, people belong to the group not because they possess some high-risk factor which makes them more apt to purchase insurance (thus increasing adverse selection); instead they are in the group for reasons unrelated to insurance, such as all working for a particular employer. We provide you with information of group insurance experts, please compare before applying.
Understanding Group Disability Insurance - Features and Limitations
There are plenty of horror stories out there relating to group Disability insurance and the claims experience people have. Although some of these situations and stories are very sad, a major contributor of these disappointments and the bad reputation is a lack in understanding of group Disability insurance benefits. Employers provide these benefits, often only keeping the price in mind, and employees accept these benefits without ever questioning their quality. The fact of the matter is that group Disability insurance is not intended to be high quality income protection. However, the cost is lower and medical underwriting is limited, if any, allowing employers to provide it and those who are otherwise uninsurable to have some level of protection.
Group Long-Term Disability insurance traditionally insures 60% of a person's income, up to a specified maximum monthly benefit (i.e. $6,000, $10,000, etc.) and will pay benefits to age 65. Depending on participation levels and who pays the premiums, group Disability insurance usually does not require any medical underwriting, which is one of the greatest benefits of having it. Overall, most people assume group Disability insurance to be simple and sufficient, but there are many things that should be understood.
The definition of disability, which describes the circumstances in which a person can qualify for a claim, used in most group Disability insurance contracts is one detail that is often overlooked. Most group contracts will provide an Own-Occupation definition of disability, which will pay benefits if a person is unable to do his/her primary occupation, but only for the first 24-months of a disability claim. After 24 months, the definition will become an Any-occupation definition, which only pays benefits if a person is unable to perform any job for which he/she is reasonably qualified. This is a very important provision for employers to consider when planning and setting up employee benefits. It is also very important for employees to understand it, in order for them to understand the type of protection they have. The horror stories of a person on Disability claim being told that they have to go work elsewhere, will no longer seem like such a horror story - it is clearly stated in the contract.
Something that many people do not know about group Disability insurance is that benefits are off-settable dollar-for-dollar with any benefits received from Social Security Disability. Additionally, you are actually required to apply for Social Security Disability and provide proof of application to the insurance company. Although it is very difficult to qualify for Social Security benefits, if you do, the definition of disability will no longer be an issue, but offsetting benefits will be. This is also something that has contributed to the reputation that group Disability insurance has established. If people understood this, perhaps it would not be such a shock when it happens.
As an employee you should review your group Disability insurance benefits and have an insurance advisor review them as well. This will assist you in properly understanding what is and is not covered by your group plan. Additionally, if your employer pays the premiums, you may not actually be insured at 60% due to the taxation of benefits and maximum benefit caps. In either scenario you may be eligible to supplement your group insurance with personal Disability income protection, which provides a much greater quality of coverage.
As an employer the previous points should be reason enough for you to work with a broker at the time of establishing your group benefits. Group Disability insurance does provide a valuable benefit at a low cost and with no medical underwriting. However, there are multiple levels of quality that exist with group Disability insurance. By reviewing quotes and proposals from multiple companies with a benefits consultant, you are more likely to make the best decision for your company and employees. There are certain areas that saving money is very important - protecting your income and the income of your employees should not be taken lightly. Whether you are a business owner looking to review your employee benefits package or an individual looking to review your insurance coverage, you will benefit greatly from the services of an insurance professional. For businesses located in California, the Financial Services Office of Michael Kortz can help. Call (949) 226-8390 or visit http://www.tfp8.com.
About the author:
Michael Kortz, RFC, RR, HIP is a Registered Financial Consultant (RFC) who holds a degree in Economics from the University of California at Irvine. He has been an insurance broker and investment advisor since 1999. He operates a boutique insurance brokerage firm in San Clemente, CA.
To explore the right employee benefit program for your business, please visit Employee Benefits Information.
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