Frequently Asked Questions
What is voluntary disability insurance?
Employee-paid disability coverage offered through an employer's benefits platform, typically supplementing employer-paid group LTD. Premiums are after-tax (so benefits are tax-free), and coverage often portable when leaving the job.
Why pay for disability insurance with after-tax dollars?
Tax treatment of benefits matches premium tax treatment. After-tax premiums = tax-free benefits. With a 60% income replacement target, after-tax benefits effectively replace 80%+ of pre-disability take-home pay vs. ~45% if benefits were taxed.
Should I buy voluntary disability if I have group LTD?
Often yes. Group LTD typically caps at 50-60% of base salary (excluding bonus/commissions) and is taxable if employer-paid. Voluntary buy-up can raise replacement to 70-80% on a tax-free basis - particularly valuable for high earners and commissioned roles.
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