In a SmartPros course segment, Joseph E. Godfrey, III, Director of CPA and Client Services for American Business & Professional Program, outlines the questions to ask to estimate disability insurance cost, what he calls the "how's" of disability:

• How much benefit are you going to get?
• How soon will you start receiving the benefits?
• How long will you receive the benefits?
• How is a disability defined?
• How is the residual treated?
• How much does it cost?

All of these "how's" are questions to ask when looking at either group coverage or individual coverage plans, but there is a difference between a group and individual plan, says Godfrey. In a group plan, a person's age, health, sex, smoker status, occupation and avocational pursuits would not affect the premium because everybody gets into the plan by virtue of being employed at the firm. If it were an individual policy, these extra identifiers would have a bearing on the pricing.

What is the current trend for employer-provided disability insurance? Godfrey says whereas larger companies tend to offer disability insurance as an employee benefit, smaller companies tend to make it an add-on.

"The tough economy has led many companies to try to integrate the individual products with the group products," explains Godrey. "In the really big companies, for example, by having plans done they'll reduce the level of coverage for the larger claims and institute individual disability programs, the very large employers actually ended up saving money while stabilizing the long-term cost.

"In the small company marketplace with 25 to 100 employees, we're seeing companies making payroll deduction, disability coverage available to supplement group insurance coverage."

So how can employers provide cost-effective disability group coverage?

Randall Peck, a specialist in disability insurance, says some employers offering group insurance have lowered their disability cost by taking limited mental and nervous contractual definitions, thereby eliminating their exposure.

For instance, most group plans cover 24 months of mental and nervous disabilities unless a person is hospitalized, says Peck. That means a stress-related disability after 24 months would no longer be covered, and thereby, they would no longer be receiving any benefits.

"An employer provides [group insurance] on an employer-pay-all basis," Peck adds. "Employees can supplement themselves with individual contracts."

Peck supplies one question to ask when examining disability insurance. "If your costs have been on the rise, and there is some room for improvement in the plan, what are the areas that you, the employer, want to maintain on a going forward basis?"