Did you know that one in four of today’s 20 year olds will have some sort of disability that prevents them from working – either short term or long term – before they retire? Of that, 90 percent of disabilities are due to illness, not accidents. In other words, there is a good chance that you or someone you love will be affected by some sort of disability during your working years.
Many employers offer group disability coverage. Group plans can be really convenient – someone at your company is doing the research for you, and the company may be picking up the cost of the coverage – all you have to do is enroll! If you have a plan through your employer, you may think you are covered. Before you decide to rely on this group plan, you may want to give individual supplemental insurance another look.
What is Supplemental Disability Insurance?
Supplemental disability insurance is coverage that can be purchased to cover lost income with benefits paid directly to you when you cannot work because of an injury or illness. Simply put, it insures your paycheck by covering a portion of your earnings so that you are able to cover your monthly bills and living expenses if you are unable to work. The coverage is meant to supplement group disability policies offered by your employer. Unlike other forms of insurance, disability benefits are designed to protect your livelihood – your paycheck – when you are unable to work.
Three Reasons to Consider Supplemental Insurance
- Group Disability Plans May Fall Short – most group disability plans will cover 60 percent (or less) of your earnings if you are unable to work. When your employer pays the premium, you will be taxed when you use the benefit. After taxes are taken out, you could receive closer to 40 percent of your salary with a group disability plan. You may ask yourself, “Could I live on 40 percent of my current earnings?” If the answer is no, you may want to consider individual disability to reduce the gap.
- Group Plans Aren’t Portable – If you rely on your company’s group life or disability plan, you will likely lose your coverage if you leave your employer. If you lose your coverage when you leave your employer’s group plan, you will be starting at square one with a new policy, and you may need to wait a certainly length of time before benefits are available to use.
An individual supplemental plan, however, is your policy no matter where you work. If you have an individual policy, you could rely on it to close the gap if your new group policy hasn’t kicked in yet.
- Group Plans May View Your Disability Differently – How your group policy defines “disability” may affect how many benefits you are eligible to receive, and may have specific rules around “chosen professions.” For example, if you are a dentist who relies on your hands for detail work and you develop Parkinson’s disease, you would have a difficult time working as a dentist. Your group disability plan would likely provide benefits for a pre-determined time period, but reduce benefits after you have had an opportunity to find a job in a career that allows you to work through your disability. A supplemental disability insurance plan would help by closing the gap in pay from your chosen profession to a replacement job.
When Is the Best Time to Buy
If you decide individual disability insurance is right for you, you will need to go through an underwriting process. As part of this, you will be asked about your health, pre-existing conditions, and whether or not you have a group plan in place. The amount of individual disability insurance you can purchase will depend on the terms of your group plan. If you have a pre-existing condition or other health concerns, it may be more difficult to get the level of coverage you may need.
So, when is the best time to buy? You will get the most favorable rates (and lock in your ability to buy supplemental disability insurance) when you are young and healthy. Buying a supplemental policy will usually be much more affordable than a single, standalone policy.
If your employer offers a group disability plan, that is a great start! Group policies definitely have their advantages. But, you may not want to rely on that for 100 percent of your coverage. Worried you may have some coverage gaps? Talk to your Farm Bureau agent, who will do a SuperCheck® and help ensure that you have the right level of coverage for you and your family.