We didn't have this type of insurance at YC but now we're going to get it. So thanks for the tip Jason.
Disability insurance is all about the definition of disability. Only a few people have a truly comprehensive disability policy through their employer. This is because the definition of disability for group policies usually requires that, when making a disability claim, you cannot work in your job "or any other job" (or something to that effect). As as a result, you usually must be completely and totally disabled on a permanent basis to collect long term disability from your employer.
http://www.bogleheads.org/wiki/Disability_insurance
Often, they don't kick in for 6 months and then because you're still able to sell pencils for 50 cents on the street corner they will not cover you.
The reason why individual policies are typically much more expensive is because their definition of disability is different. Many individual policies are "true own occupation" which means that if you're now a neurosurgeon they can't force you to work at a McDonald's drive through.
It provides me benefits from 6 months after my disability (I decided not to pay for short term which starts at 2 weeks until 6), and will keep going until I am ~65 years old.
Still, considering I'm paying less than a coffee per month for LTD, and personally knowing someone who was once working as a top tier developer and got into a serious biking accident that left him with brain injuries, I'm going to buy into it. Next year I'm going to push HR about that 24 month clause.
Reasonable occupation is pretty vague and I think this kind of word-play is what helps insurance companies find reasons or even solid justifications to not pay up in the end.
As your parent comment implied, the insurance company can just argue selling lemonade or pencils is a 'reasonable occupation' and can even prove there are people surviving daily on such a business. And all that can become a base reason to just not pay up.
It's insured turtles all the way down.
In my own circumstances I've found many insurance contracts to be worthless in practice.
The tone of the article seemed to be about doing something for your employees that, whether appreciated or not, is good for them and your own piece of mind. Taking care of them. Obviously it depends on size etc, but it seems like a good fit.