When I left my large company, I lost most of my employee benefits. Thanks to Set For Life, I now have my own insurance that I can take with me throughout my career.

— Joseph L., Consultant, New York, NY

Individual policies

  • Individual policies require you to provide evidence of good health. The insurance carrier can decide whether or not to insure you. As a result, the insurance carrier can be picky with whom they offer coverage to. The good news is this allows the company to be more liberal with policy provisions, providing you with better policy definitions.
  • The policy is portable. You may take it with you throughout your career and job changes.
  • Coverage cannot be cancelled by the insurance carrier as long as you pay your premiums on time.
  • Benefits are usually tax-free income during disability if you pay with personal dollars.
  • It is important to think long term and consider the potential devastating effects of losing your income.

Short Term Group Disability Insurance

Short term group insurance provides weekly benefits for employees who are totally or partially disabled by a covered injury, illness, pregnancy or mental disorder. Typically short term disability insurance is cost prohibitive to an individual. Therefore an individual would be better off signing up for the short term disability insurance through their employer.

Long Term Group Disability Insurance

Group disability plans typically provide the totally disabled employee with up to 60 percent of pre-disability income to a specified maximum such as 10,000/month. Coverage is available for both short and long term disabilities and often without medical evidence of insurability. Group disability insurance helps attract and retain quality employees and is tax deductible to the business.
Drawbacks to a group disability insurance policy include:

  • Total disability definition. Most group policies require you to be totally disabled to receive benefits.
  • Taxable. If the employer is paying the premiums, the benefits are taxable to you. This diminishes the amount of benefit you take home.
  • Benefits can be cancelled by employer
  • Benefits are not portable if you leave your employer
  • Benefit amounts are capped. Reduces replacement ratio for higher incomes
  • It is important to consider supplementing your group policy with an individual policy. This will provide you with coverage that is portable, more specific to your occupation and will increase your overall benefit.

Association Insurance (similar to group insurance)

  • Typically a less favorable definition of disability.
  • Limited benefit amounts.
  • May not have some riders available such as increase options or COLA.
  • Read the fine print. Sometimes the policies have a favorable definition of disability the first year or two of claim and then become very restrictive.

 

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