Do You Need Individual Disability Insurance if You Have Group Coverage?

​Think disability couldn’t happen to you? Think again. Disability is more common than many people assume. According to the Council for Disability Awareness, 25 percent of all adults will miss work because of disability at some point in their lives.1
 
Many employers offer disability coverage through a group benefit plan. In fact, you may think that you’re protected against disability because of your group insurance. However, group coverage often isn’t enough to minimize every threat. It’s possible that you may need a more robust individual disability insurance policy to fully protect yourself.
 
Not sure whether you have the right coverage? Below are some of the key differences between group policies and individual policies. A financial professional can help you analyze your risk and develop a strategy.

Cost
 
Group disability coverage is usually less expensive than it’s individual counterpart. The risk is shared and distributed among many people and that minimizes the cost to each person. It’s also possible that your employer may pay some or all of the premiums.

However, individual policies and group policies can’t always be compared evenly. Individual policies often have more robust protection. They may have different elimination periods or benefit amounts. You can often design a long-term disability policy to meet your needs and budget, so it may not be as costly as you expect.

Benefit Amount
 
Group disability policies usually pay your benefit as a fixed percentage of your income.  While the benefit may be helpful, it’s unlikely to fully replace your income. It’s not uncommon for group plans to replace only half or 60 percent of income. Many group plans also have a maximum benefit that you cannot exceed, even if your income would generate a higher amount.
 
With an individual policy, you may be able to receive a higher benefit amount. For instance, some may pay up to 80 percent or even 100 percent of your income as a benefit should you become disabled.

Portability
 
One of the biggest challenges with any employer-based insurance coverage is that the protection is tied to the job. If you leave your job, you lose the coverage. And there’s no guarantee* that your new employer will have a similar benefit.
 
An individual policy stays with you, no matter where you work. As long as you pay the premium, you keep your coverage.

Benefit Eligibility
 
Perhaps the biggest distinction between group policies and individual policies is the way disability is defined. Many group policies cover only total disability or have an “any occupation” disability definition. That means you’re defined as disabled only if you can’t work in any occupation.
 
With an individual policy, you can choose an “own occupation” definition. That means you simply have to be too disabled to work in your job, not any potential job. This is helpful if you work in a highly skilled field. For instance, if you’re a surgeon and injure your hand, you may not be able to work in your field even if you could perform other jobs. In that example, you would still get your benefit from an individual policy, but you may not get it from a group policy.
 
Ready to protect yourself against disability? Let’s talk about it. Contact us at DSM Financial. We can help you analyze your risk and develop a plan. Let’s connect soon and start the conversation.
 
1http://disabilitycanhappen.org/disability-statistic/
 
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18185 - 2018/10/22