It is seen that majority of people who have disability insurance got it because of their employer. But, it is necessary that you look out for your own well being. Generally group or employer disability insurance is not very beneficial for your needs and it is better if you consider an individual insurance.
We find it hard to imagine ourselves being disabled because of some illness or an injury. But, research shows that one out of every three people becomes disabled for at least a time period of three months before getting retired. It has also come out of research that maximum people never opt for disability insurance, as they don’t consider it a necessity of life.
But, before buying insurance for yourself, one must consider some points that will help in deciding if there is actually a need for such insurance. Just assume what kind of thoughts and questions will come at the time when you are no longer able to work. Think what your current expenses are and how longer you would be continuously spending without any income? How will you manage other necessary expenses like car payments, house and more, without money? For how long you would be economically standing on your feet?
If you will not go to work for a short time period, all the money saved by you over the years will be spent by the time your disability ends. Isn’t it unfair to spend all the hard earned money in a few months or years? What if some other source pays for all your medical expenses?
It is seen that millions of people are insured for a group long-term disability plan. But, there is a drawback, as one might not get coverage in some situations. You will also find most of the group plans do not pay for common forms of disability. In virtual terms, you are covered. But, are you?
We don’t know that the group insurance policy provider can cancel your plan in case their claim experience is bad or if your employer terminates the plan. Whereas, in case of a personal disability insurance policy, your policy provider can never cancel the plan and you are the only one to take the decision.
Another drawback of a group LTD plan is that if your insurer finds an increase in the number of claims, they can increase the premium on the plan. This is just impossible in case of an individual disability insurance policy.
The group LTD policies are taxable just like your income, but an individual policy is 100% tax-free and the benefits in-group policy get reduced due to the amount of benefits you receive from workers compensation, social security and other sickness programs. On the other hand, individual policies have no such offsets.
There are certain occupations that are always covered by individual policies. If you are an urologist who became disabled and is unable to practice in the specialty, but could teach at a medical school, your individual disability insurance policy will pay you benefits. In this way, you will receive policy benefits and medical school teaching salary.
Individual disability insurance premiums plans also pay you full benefits for the presumptive disability, even if you are fully employed. In case of loss of sight or hearing or both the legs stop functioning, the person will get benefits if he has an individual policy, but not in group LTD plans.
If you are looking to buy individual disability insurance, a financial planner, Mortgage Company or a policy-selling agent can be of great help. You can take the policy for two years, five years or till your retirement period. In case you want your policy benefits to get raised with salary increase and inflation, Cost of Living Adjustment (COLA) is the best plan for you. It will add some percentage to your coverage every year.
Here are a few things you must know about individual disability insurance:
- Before taking an individual disability policy, you are required to clear a medical exam that will determine your insurability.
- Most of the personal disability insurance policies cannot be canceled and are on a guaranteed renewable basis.
- The meaning of a non-cancelable policy is that after the medical exam and your signature on the dotted line with the insurer, the company cannot cancel coverage or increase the premium.
- On the renewable guaranteed basis, the insurer cannot cancel the plan but he can increase the rates.
- The individual disability policy will pay a fixed amount every month during the time of disability, which will not be more than 80% of your current salary. Your occupation, source of insurance will be some determining factors for the coverage amount.
- Individual disability plans are free from the limitations present in Group LTD plans. You might have to pay some extra money to get the coverage, but ultimately you will get what you pay for.