DISABILITY INSURANCE
Disability Insurance is the industry name for a plan that provides for periodic payments of benefits when a disabled insured is unable to work. The insurance product is designed to replace anywhere from 45 to 65% of your gross income on a tax-free basis should illness keep you from earning an income in your occupation. Every disability policy is different and should be assessed by the consumer based on the quality of plan created for the individual’s needs and not by the cheapest disability insurance policy on the market.
Many consumers do not plan for the possibility that they will be faced with a debilitating accident or illness during their working years. A professional with a family, for example, should consider disability insurance a necessity. For a consumer, it is not a required purchase like home owner’s insurance. Individuals believe they may have disability coverage through their employer. This at times may be true, but the quality of coverage often leaves the disabled employee short of the protection he/she thought they had.
GROUP VS INDIVIDUAL COVERAGE
To help provide income in the event of disability, many employers offer their full-time employees group short and long-term disability coverage as a benefit. You can also purchase an individual disability income policy to either supplement a group plan or provide additional coverage if a group plan is unavailable.
There are many differences between group and individual coverage. Group disability coverage is tied to your employment and if you change or lose your job the coverage is not portable. The cost of group coverage can also change year to year. Individual disability policies usually have higher premiums, but offer better benefits because applicants are individually underwritten.
In contrast, group benefits cover all eligible employees, regardless of their health. Once issued, the language, benefits and costs of an individual disability policy are contractually guaranteed, even if you change your occupation or employment. Individual policies are also issued with exclusions that limit claims that are due to pre-existing conditions.