Think about your biggest financial concerns. What tops the list? If you’re like most Americans, you’re worried about saving for retirement, paying down debt or even dealing with costly medical bills. Most other financial risks can be covered through various insurance products.
There’s one potential risk that may deserve more attention, though. It’s disability, and it may be more likely than you think. 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 people don’t think about disability risk because they participate in a group disability plan. Disability insurance is a common element in many group benefit plans. The coverage is often low-cost, so it may seem like an effective form of protection against disability risk.
Is group coverage really sufficient, though? It depends on your budget and objectives. It may be that an individual policy better fits your needs. Below are some of the key differences between group disability insurance and an individual policy. If you don’t have group coverage, or if you feel yours is insufficient, you may want to talk to your financial professional about additional protection tools.
Disability insurance is meant to replace your income if you’re unable to work because of injury or illness. The benefits are usually paid as a percentage of your monthly income. In a group plan, the percentage is usually defined in the plan document and is the same for everyone, regardless of individual need. It’s not uncommon for group plans to replace only half or 60 percent of income.
Individual policies allow for more flexibility so you can adjust your coverage to better fit your needs. For example, some may pay up to 80 percent or even all of your income as a benefit.
There are also differences with regard to when the benefit is paid. All disability policies have what’s called an elimination period. This is an amount of time that must pass between the time you suffer the disability and when benefits start. For instance, many policies have a 60- or 90-day elimination period.
Again, in a group plan, the elimination period is fixed and defined for all participants. In an individual policy, you may be able to select from a variety of elimination periods to better fit your needs.
One of the biggest challenges with any employer-based insurance is that the coverage is tied to your employment. If you ever leave the employer, you lose the insurance. Your new employer may not have similar protection.
An individual insurance policy stays with you regardless of where you work. That means you always have disability protection, no matter how many times you change employers. As long as you meet the premium requirements, the policy stays in force.
The biggest distinction between a group policy and an individual policy may be how disabilities are defined. To qualify for benefits, your disability must meet the definition and guidelines of your specific policy.
Many group policies have limited definitions of disability. For example, you may have to be totally disabled to qualify for benefits. Of course, while many disabilities may take away your ability to continue in your career, they aren’t necessarily total disabilities. If you’re a dentist and you severely injure your hand, you may be unable to continue work as a dentist even if you could work in other careers.
With an individual policy, you can choose “own occupation” coverage. This means you are considered disabled if you aren’t able to continue in your career, even if you could work in other jobs. This type of coverage can be helpful if you work in a highly skilled industry.
Ready to protect yourself against disability? Let’s talk about it. Contact us at J. Harris Financial. We can help you analyze your risk and develop a plan. Let’s connect soon and start the conversation.
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18185 - 2018/10/22