You probably have many different types of insurance for your business, including health, liability, vehicle, and property, to name a few. But many small business owners neglect what may be one of the most important types of insurance coverage – disability. According to the U.S. Social Security Administration, 56 million Americans live with disabilities and 38 million live with severe disabilities. And for 20 year olds that are insured for disability, more than 1-in-4 of them will become disabled before reaching retirement age.
If you have 10 or more employees, group disability insurance can provide a covered employee with a benefit of up to 60% of their pre-disability income, to a specified maximum.
There are generally two types of disability coverage offered to employees by their employer – short-term disability (STD), with benefits typically paid for less than one year, and long-term disability (LTD), with benefits that can last to age 65 or beyond.
Who pays for disability insurance premiums (employer, employee, or a combination) and how premiums are paid (pre-tax or after-tax dollars) determine if disability insurance contributions are tax deductible and if benefit payments are taxable or tax-free.