When Does Coverage End on a Group Life Insurance Policy?

When Does Coverage End on a Group Life Insurance Policy?

When an employee is terminated or retires, a legal right (subject to certain conditions) called a conversion privilege comes into play. This conversion privilege allows the employee to convert what was group term life insurance into individual protection through the issuance of a personal contract. When an employee quits or is fired or the employee […]

What is Disability Buy-Out Insurance?

What is Disability Buy-Out Insurance?

Disability buy-out insurance is designed to provide coverage funds to buy out the disabled individual’s interest in a business upon the total and permanent disability of a shareholder or partner. Because of the many factors involved as well as the increased potential for adverse selection and moral hazard, insurers underwrite these policies very tightly and […]

Are Disability Income Benefit Payments Subject to Income Tax Withholding?

Are Disability Income Benefit Payments Subject to Income Tax Withholding?

While the tax laws generally require employers to withhold income tax from disability income benefit payments, the tax rules do not require withholding on benefit payment amounts that the employees can excluded from their income. Further, if an insurance company or other entity under an accident or health plan makes the disability benefit payments, the […]

Are Personal Disability Income Insurance Payments Paid With Pre- or Post-Tax Dollars?

Are Personal Disability Income Insurance Payments Paid with Pre- or Post-Tax Dollars?

Most often, disability plans that require employee contributions be paid with post-tax employee dollars. If so, benefit payments are free of any tax liability. Some plans are paid with employees’ pretax dollars through Section 125 plans. By paying premiums with pretax money, the employee’s income is reduced, so they pay fewer taxes. However, this relatively […]

Are Disability Income Benefit Payments Subject to FICA and FUTA Tax?

Are Disability Income Benefit Payments subject to FICA and FUTA tax?

Payments made to disabled employees by either an employer or an insurer are subject to social security tax (FICA) and federal unemployment tax (FUTA) for the first six months after the last month in which the employees worked for their employers. After six months, such payments are exempt from social security and federal unemployment tax. […]

Alternatives to Buying Disability Income Insurance

Alternatives to Buying Disability Income Insurance

Alternatives to disability income coverage include self-insuring against the possibility of a disability, purchasing a life insurance policy with a waiver of premium benefit or rider, purchasing critical illness insurance, and being able to qualify to receive Social Security disability income payments. The only real alternative to disability income coverage is to self-insure against the […]