FINANCIAL SUITS OF ARMOR
haunt the employee. However, if the coverage isn’t used, then the DI still remains a benefit, since the employee hasn’t paid out any money.
Employers are able to take out a group policy for all eligible employees, so, their premium amount is much smaller than if all the employees were to take out separate policies on themselves. This also makes entry into the plan much easier for the employee. Simply by filling out the applicable forms and waiting the required amount of time (usually employers mandate that an employee wait three months before being allowed to participate in any type of benefits program), the employee has disability coverage with no out-of-pocket cost. The coverage will then remain in effect for as long as the employee remains eligible.
Typically, DI plans are split into two categories: short-term and long-term. Short-term benefits usually have a schedule of weekly benefits that are based on earnings categories. However, they have relatively low maximum benefits. That is, the overall payout is rather small when compared with long-term plans because short-term plans only cover a specific amount of time, such as 6, 12, 26, or 52 weeks. These plans are designed to cover a moderate amount of earnings over a short period of time.
Long-term plans typically kick in after a short-term plan has expired, so that there are no overlapping benefits. This type of cover- age takes care of more serious, long-term illnesses and disabilities. Long-term coverage is specified by a percentage of earnings, such as 70 percent, and is accompanied by a higher base amount of benefits, which could provide the recipient with monthly benefits of $5000 or more. Generally, the elimination period for long-term DI is longer than it is for short-term since the recipient is generally receiving short-term DI benefits during that time.
A very important consideration about employer-sponsored DI is that the employer pays for it, not the employee.And, since the premiums paid aren’t included in the employee’s gross income, any benefits received under the plan may be taxable to the employee. Generally, the tax code provides that money received through accident or health insur- ance due to personal injuries or illness be excluded from the individual’s gross income for tax purposes. This rule, though, excludes any benefits received from an employer-sponsored plan where the contributions