Health insurance dominates the small business benefits conversation, but group life and disability insurance consistently rank among the most valued and least understood benefits available to employees. They're also among the most affordable for employers to add. Many small business owners in North Dakota and Minnesota who have group health in place haven't thought seriously about life and disability — and when they do, they often discover these coverages are simpler and less expensive than they assumed.
Here's what you need to know about both.
Basic Group Life Insurance
Group life insurance is typically the simplest and most affordable employee benefit you can add beyond health coverage. Basic group life pays a death benefit to the employee's beneficiary if the employee dies during employment.
Standard benefit amounts: The most common employer-paid benefit is 1x or 2x the employee's annual salary. A $60,000/year employee covered at 2x salary has a $120,000 life insurance benefit. Some employers use a flat amount (e.g., $50,000 for all employees regardless of salary) to simplify administration and equalize the benefit.
Cost to employer: Group life premiums are calculated per $1,000 of coverage, based on the age distribution of the group. For a group with average employee ages in the 35–50 range, employer-paid basic life coverage typically costs $0.10–$0.25 per $1,000 of coverage per month. For a 10-person group covered at 1x salary with an average salary of $60,000, total monthly cost is often $60–$150 — under $1,800 per year to provide a meaningful benefit to every employee.
Tax treatment: Employer-paid group life is tax-deductible to the business. For the employee, the first $50,000 of employer-paid group life is excluded from taxable income. Coverage above $50,000 creates a small imputed income addition to the employee's W-2, calculated using IRS Table I rates.
AD&D (Accidental Death and Dismemberment): Most group life policies include AD&D coverage, which pays an additional benefit for accidental death or specified injuries (loss of limb, loss of vision, etc.). AD&D is typically included at no additional cost or minimal additional cost.
Supplemental Life Insurance
Beyond basic employer-paid life, you can offer employees the ability to purchase additional coverage through payroll deduction — called supplemental or voluntary life insurance.
Supplemental life allows employees to buy additional multiples of salary (often up to 5–8x their salary, subject to evidence of insurability above a guarantee issue threshold) at group rates, which are typically lower than individual market term life premiums. Employees with young families, significant mortgage debt, or other financial obligations often value this option highly.
The employer pays nothing for supplemental life — it's 100% employee-paid through payroll deduction. The administrative work is minimal: set up the payroll deduction, submit enrollment elections to the carrier, and include it in open enrollment materials. The benefit to employees is access to group pricing and payroll-deducted premiums.
Short-Term Disability Insurance
Short-term disability (STD) insurance replaces a percentage of an employee's income when they're unable to work due to an illness, injury, or pregnancy. This is one of the most visible and appreciated benefits from the employee perspective, because the scenarios where it applies — surgery recovery, serious illness, childbirth — affect people directly.
Benefit structure: STD typically replaces 60–70% of the employee's pre-disability income. Benefits begin after an elimination period (the number of days the employee must be disabled before benefits start) — usually 7 or 14 days for injury, 7 days for illness. Benefits continue for the duration of the disability, up to the maximum benefit period, which is typically 13 or 26 weeks.
Coordination with state programs: Minnesota has a state Paid Leave program, with benefits available for qualifying employees beginning in 2026. North Dakota does not currently have a state-mandated paid leave program. The relationship between state programs and employer-sponsored STD is important to understand as Minnesota's program rolls out — employers with STD policies will need to coordinate benefits to ensure there's no duplication or gap.
Cost to employer: Group STD premiums depend on the benefit amount, elimination period, and benefit duration, as well as the demographics and industry of your group. For a typical small business group, employer-paid STD runs approximately $15–$35 per employee per month. A 15-person group might spend $2,700–$6,300 per year on STD.
Value to employees: An employee earning $55,000/year who becomes disabled for 12 weeks and has no disability coverage loses approximately $12,700 in income during that period. STD replacing 60% of that loss means the employee receives approximately $7,600 in benefits — enough to make a meaningful difference in financial stability during a difficult time.
Long-Term Disability Insurance
Long-term disability (LTD) insurance picks up where short-term disability leaves off. It's designed for extended disabilities — a cancer diagnosis, a serious accident, a chronic condition — where the employee won't return to work for months or years.
Benefit structure: LTD typically replaces 60% of pre-disability income after the STD benefits expire (the elimination period for LTD usually aligns with the end of STD benefits — 90 or 180 days). Benefits continue until the employee recovers, reaches retirement age, or exhausts the maximum benefit period.
Who needs it most: LTD is proportionally more important for higher-income employees — business executives, key technical staff, professionals whose income is substantial relative to what they'd receive in Social Security Disability Insurance (SSDI) benefits alone. An employee earning $120,000/year who becomes permanently disabled would receive perhaps $24,000–$30,000 annually from SSDI, a fraction of their working income. LTD replaces the gap.
Cost to employer: Group LTD for a small business typically runs $25–$60 per employee per month at the employer level, depending on the benefit amount, definition of disability, and group demographics.
Tax treatment: If the employer pays the LTD premium, benefits received by the employee are taxable income. If the employee pays the premium (through payroll deduction), benefits are tax-free. Some employers deliberately structure LTD so employees pay the premium specifically to preserve the tax-free benefit status.
How These Work Together as a Benefits Strategy
Group life, STD, and LTD are not independent items to add randomly to a benefits package. They work as a system: life coverage protects employees' families if they die; short-term disability protects their income during recovery from a temporary condition; long-term disability protects their income if a condition prevents return to work over the long term.
For most small businesses in North Dakota and Minnesota building a complete benefits package, the strategy is:
- Start with health (the cornerstone)
- Add basic life and AD&D (low cost, high perceived value)
- Add STD (very visible and appreciated benefit, especially by employees with families)
- Add LTD (especially important for higher-income employees and key personnel)
Adding voluntary supplemental life at the same time as basic life adds employee-choice flexibility with minimal administrative burden.
The combined cost of basic life + STD + LTD for a 15-person group often runs $5,000–$10,000 per year — meaningful but modest relative to the total benefits spend and the retention value these coverages provide.
To explore how life and disability coverage fit into your benefits strategy, visit /employee-benefits or schedule a conversation with Kain Carlson.
Kain Carlson is an independent insurance advisor based in Fargo, ND, licensed in North Dakota and Minnesota. He works with owner-operated businesses across all three coverage pillars — commercial, benefits, and personal — under one advisory relationship. Schedule a review to see where your coverage stands.