Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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Group disability insurance is coverage that provides income for an individual who is a part of an employee group when he or she is unable to work due to accident or illness. This type of coverage is often a standard benefit in the benefits package for employers who provide such perks.

Compare online insurance rates for private disability coverage by entering your zip code now!

Group disability insurance will usually pay a maximum of 50-60% of an employee’s regular wages during the disability period. Whether or not such earnings are taxable or not are determined by who pays the insurance premiums.

Important Things to Know About Disability Insurance

Disability insurance is typically of a fixed duration. When such benefits run out, the individual must find another source of income. You should know how long your plan benefits last. Some policies do have lifetime payout options, but most cover a set period of time only so that you have the time to work out an alternative income source.

In order to be eligible for disability insurance income, an employee must meet certain conditions. These include inability to be able to perform the necessary tasks of his or her job. However, there are two different types of disability insurance in this respect.

  • One is occupation only coverage, meaning disability insurance is paid out if you are unable to perform the tasks of your occupation
  • The other type of disability coverage will only pay out if you are unable to do any type of work at all

It is important to know which type you carry.

Disability insurance benefits can be tax-free, partly taxed or completely taxable, like regular income. This depends on who pays the premiums for the coverage. If the employee pays 100%, the benefits are tax-free, as the money spent on premiums has already been taxed. If the employer subsidizes it, the percentage of subsidization is the percentage of benefits that are taxable. If the employer completely pays the premiums, disability benefits are taxable like regular income.

Since benefits are usually 60% or less than the employee’s regular income, it is beneficial to receive them tax-free. For this reason, many plans are set up so that the employee pays all the premiums, but they are done automatically as a payroll deduction for convenience.

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Features of Group Disability Insurance

One of the advantages of group disability insurance is that someone else, usually the human resources department of your workplace, has done all the research for you to find a good disability insurance provider. This means one less thing for you to do, but it also means that you may be getting some things you don’t want and not getting other things you do want.

The cost of group disability insurance is also very different than what you would find if you were to shop around for individual disability insurance. If you are older, in poor health or have certain risk factors, you will find that your group disability insurance rates are a bargain. In fact, on the open market, you may not even be eligible for coverage. However, if you are younger and in excellent health, you are likely paying too much for group disability insurance because you are helping to subsidize those who are not.

An Alternative to Group Disability Insurance: Individual Disability Insurance

Many people whose companies offer group disability insurance decide to look into the option of individual disability insurance for various reasons. It may be for tax reasons, to save money, because they are unsatisfied with the choice of insurer their company has gone with or because they need more benefits than the group plan provides.

If you decide to investigate individual disability insurance, take the time to look around carefully and learn as much as you can about it. This type of insurance gets more costly as you age. Therefore you will want to take out a policy when you are young and qualify for good rates, and keep that policy long term.

To get quotes on individual disability insurance coverage, look no further than the online disability insurance quote tool. This free tool will help you get quotes quickly and simply from different companies which offer such coverage where you live. You just put in your zip code, answer some questions and the tool will do all the work of contacting insurers for you. Before you know it you will have easily comparable quotes to choose from which are all based on the exact same information.

Get quick and free online disability insurance quotes now!