Disability and Other Insurance Options

Disability and Other Insurance Options

Who can benefit from Disability Insurance?

The answer is simple: If you are working and bringing in an income, you can benefit from disability insurance. With injuries and illnesses occurring every minute in the United States, it is absolutely essential that you protect your income before the unexpected occurs and you are unable to provide for your family.

How much insurance do I need?

The best way to determine how much insurance you need is to figure out your monthly living expenses and whether or not you can cover them with the income of your spouse, personal savings, and social security. If these sources are not enough, then disability insurance will work to meet the difference. Additionally, this insurance can prevent you from having to dip into your savings and retirement fund, thus leaving you with financial security both during and after your disability.

Group Benefits vs. Individual Policy - What’s the Difference?

Most findings will show that employers, rather than the employees, provide the majority of disability insurance. This means that companies typically provide group insurance for their employees that will provide protection in the case of an emergency. With group protection, in the case where an individual cannot work for a period of time, the insurance company will replace a portion of his or her income.

The percentage of income replaced, however, will depend on whether short-term disability or long-term disability insurance is provided. With short-term, a larger portion will be replaced but only for about 3 months time. On the other hand, long-term insurance covers a smaller portion of one’s base salary (about 50%), but will extend this coverage for a longer period of time. Group insurance, as opposed to individual, oftentimes makes it easier to qualify.

In contrast, individual disability insurance is purchased by the employee on his or her own and will go with them regardless of where they work. In addition to being transferable, individual insurance also covers between 40%-65% of one’s pre-disability gross salary and is received income-tax-free once paid with after-tax dollars.

Disability Insurance for Professionals

We understand that every practice is different and that is why we offer our services to professionals from a wide variety fields. Physicians, consultants, business owners, executives, and attorneys alike all need protection for their income and our team specializes in providing guidance every step of the way. We take the time to understand your profession’s specific demands and using our expertise on insurance, we are able to find a plan that best fits your needs and lifestyle. With disability insurance, you can rest easy knowing that your income is safe, even if the unexpected occurs.

Group vs. Individual Insurance

If you work for a company that provides short-term and/or long-term disability insurance, then you are in luck. This type of group insurance comes at no cost to you and requires no underwriting so that you automatically qualify. This type of insurance will usually cover more than half of your income up to a certain set limit. The downside to this insurance, however, is that the benefits you receive may be taxable and if you lose or switch jobs, the insurance coverage does not transfer over.

How much Group Disability Insurance is Necessary?

The best way to determine if you need to supplement group insurance with individual insurance is to figure out your monthly living expenses and whether or not you can cover them. In addition to the supplemented income from your employers insurance, also take into account the income of your spouse, personal savings, and social security to see if these funds are sufficient. If these sources are not enough, then individual disability insurance will work to meet the difference. Additionally, this insurance can prevent you from having to dip into your savings and retirement fund, thus leaving you with financial security both during and after your disability.

Individual Disability Insurance

In the case that your employer does not provide group disability insurance, you should strongly consider purchasing individual insurance on your own. Not only does this option give you the opportunity to switch jobs without fear of losing coverage, but it also allows you to choose from a variety of insurance carriers and agents. If your employer does provide insurance, but it will not sustain you in a time of injury or illness, individual insurance can also be purchased to supplement this income. Regardless of your career and its provided insurance, or lack thereof, individual disability insurance is one of the best ways to protect you and your family from the unknown.

Policy Provisions and Benefits

Evidence of Good Health: It is in an insurance company’s power to choose whom they insure and whom they do not. By providing evidence of good health, a company is more likely to offer you coverage also enables the insurer to provide more flexible policy provisions.

Non-Cancelable: As long as you are on top of your payment schedule, an insurance company cannot cancel your coverage or change your premiums. The younger you are when you first purchase, the lower the premiums will be throughout the remainder of you plan.

Tax-Free Benefits: If you use after-tax dollars to purchase your disability insurance coverage, the benefits that you receive will almost always come without any income taxes taken out.

Portable Policy: This coverage is yours. Unlike group insurance where the coverage is owned by the employer and is immovable, your coverage goes with you no matter where your career path takes you.

Insurability Protection: If you leave your employer and consequently the group coverage plan that they provide, you will still be protected by your individual plan. Even if you experience injury or illness, your individual plan will still allow you to raise your coverage to meet your needs.

Group Disability Insurance: Group Disability Insurance is an excellent way to attract and maintain hardworking employees. Coverage plans can be offered for short-term or long-term disabilities and more often than not, require no proof of insurability. These types of plans will provide the disabled worker with a portion of his or her income for some stated period of time.

Drawbacks to Group Disability Insurance

  • Benefits are usually capped at a monthly rate, putting those with a higher income at a disadvantage
  • Employers can cancel your benefits at any time
  • Benefits do not transfer with you if you leave your job
  • If your employer pays the premiums, the benefits you receive in the case of disability are taxable, meaning that you earn less.
  • Most policies will not provide benefits to those who are only partially disabled

Other Types of Insurance Available

Short-Term Insurance: In the case of a covered injury, illness, or pregnancy, Short-Term insurance will provide a larger sum of benefits, but for a shorter amount of time. This coverage usually lasts three to six months.

Long-Term Insurance: Long-Term Insurance covers about 40-60% of an employee’s pre-taxed income, but for a longer period of time. Usually, coverage will begin when short-term insurance (if provided) terminates.

Short-Term vs. Long-Term: Which do I need?

Ideally, the answer to this question is both. By adopting both a short-term and long-term plan, one will be covered for a large some of their income and for quiet a long time. This depends on the length and severity of the illness or injury, however. Short-term injuries may be easy to pay off with one’s savings and some help from insurance, but long-term illness can take a serious toll on one’s finances. If stuck between the two, long-term insurance is often recommended due to the nature of its benefits.

Professional Association Insurance: In comparison to group-coverage, association insurance is similar but typically has limited benefits and a harder standard of disability to prove. Although both options provide some level of coverage to employees, association insurance has several drawbacks and should only be considered in cases where the need for coverage is high and one’s budget is small. The safest option when considering disability insurance is to adopt an individual plan on its own or as a supplement to group coverage. Individual plans are better tailored to you as an individual and also adapt to the changes in your life.