Plan Types
The employer may offer both short- and long-term disability or only long-term coverage.

  • Short-Term Disability: the employer and the insurer decide upon what the maximum benefit period would be, but usually not more than twenty six weeks. The duration of benefits under short-term disability policies is typically shorter under a group arrangement than an individual one where short-term may extend up to two years.
  • Long-Term Disability: benefit payments would begin once those from the short-term policy end if the employer offers both types of disability coverage. The maximum benefit period often exceeds two years and may extend to the insured's retirement age.

Other Group Arrangements

  • Credit Disability Insurance: financial institutions furnish what is a form of long-term disability insurance to replace debtors' income in the amount of their loans. Commercial banks, savings and loan associations, credit unions, finance companies and retailers are examples of the types of companies that would purchase such coverage.

    Individual insureds pay the premia and choose which insurer to use. Each borrower may purchase insurance only up to the amount of his or her indebtedness. Creditor companies typically must have at least one hundred debtors per year, though requirements may vary by state law.
  • Franchise Disability Income Insurance: covered under this arrangement are employees of a common employer or members of a common association or society. The employer or group is the sponsor rather than the master policyholder. It collects and remits individual premia to the insurer. The insured holds an individual policy which he or she may keep in force through timely premium payments even if his or her relationship with the employer or association ends. The sponsoring organization determines the amount and type of coverage. Small groups whose size is below the minimum required by state law for group coverage are the typical user of such coverage.
  • Multiple Employer Trusts (MET): this sort of arrangement enables small employers to obtain group benefits for their employees. Coverage may be for one or several types of benefits (life, medical, disability) or even alternative forms of the same coverage (comprehensive or basic group health insurance).

    The employer must subscribe to the trust and receives a joinder agreement evidencing such membership. The employer and trust are the parties to the arrangement, not the individual insureds. Self-funding or a disability insurance contract are the two means of providing benefits. If disability insurance funds the contract, the trust is the master contract holder. The employees receive a master certificate outlining coverage. METs may use either a third party administrator or life insurance company for plan administration.
  • Multiple Employer Welfare Arrangements (MEWA): this is a type of multiple employer trust for labor unions that self insures and has tax-exempt status.


Benefits and Income Tax Implications

Related Articles
  1. Managing Wealth

    Tips for Insuring Your Salary

    Those with high incomes really can’t afford to be without disability insurance. Here's why.
  2. Financial Advisor

    Advising FAs: Explaining Disability Insurance to a Client

    Disability is a very critical type of insurance that most individuals should consider carrying. When it comes to your personal finances, long-term disability can have a devastating effect if ...
  3. Insurance

    The Disability Insurance Policy: Now In English

    Learn to translate this complicated policy so you can rest assured you're covered.
  4. Insurance

    Group and Individual Disability Insurance: What You Need to Know

    What you need to know about group and individual disability income coverage.
  5. Insurance

    Choosing The Best Disability Insurance

    Social Security benefits can be hard to collect. Find out why you need disability insurance to protect your income, and learn how to choose the right policy for you.
  6. Financial Advisor

    Disability and Business Overhead Coverage for the Self-Employed

    What every small business owner or professional needs to know about individual and business overhead disability income insurance plans.
  7. Insurance

    How to Protect Your Income No Matter What

    What does it mean to insure your income? Here are a variety of ways to do it and some insights into when it might make sense to invest in income insurance.
  8. Insurance

    Disability Insurance For Business Owners

    If you become injured and no longer able to work, would your business survive?
  9. Financial Advisor

    Top 3 Financial Steps to Take on Disability

    Going on disability can be a stressful time financially. Here are 3 steps to take on disability to help protect against significant financial blowback.
  10. Financial Advisor

    Group Term Life Insurance: What You Need to Know

    Is group term life insurance really a good deal? What you need to know about employer-sponsored group term life insurance coverage.
Trading Center