People often ask whether it makes sense to keep their current, existing individual disability insurance policy if they start a new job and now have group disability insurance benefits offered.
There are several reasons to consider keeping your individual disability insurance policy.
1) Most group policies have more restrictive definitions of disability. They may require you to be totally disabled and not working in any capacity to obtain benefits. If you have a partial disability, they may not pay any benefits. By keeping your existing policy, your policy is more likely to pay both for partial and total disabilities.
2) If your employer is paying the premiums, the group disability benefits are taxable. This will reduce the actual amount of take home benefits payable to you. If you pay your individual disability policy from a personal account, the benefits to you are tax free.
3) Your employer may cancel your group policy at any time.
4) If you leave your employer, you may not be able to take your disability insurance with you. You are then in a situation where you need to go out an apply for individual benefits. If you have had an adverse change in health, this may be difficult to do.
5) Most employer sponsored policies do not cover bonus income or commission income. If you receive significant bonuses or commission income, a lot of this income may not be covered by your group policy.
6) If you have a large individual policy and subsequently enroll in a group policy, you may keep the larger individual benefit. With an noncancelable, guaranteed renewable contract, the company cannot force you to reduce your benefits.
If you have a large individual policy and now have a group policy, you may consider reducing your individual benefits to supplement on top of your group policy. This will allow you to maintain your coverage and have the opportunity to increase it in the future as your income increases or if you change employers.
For more information about keeping or dropping your group policy, please contact Set for Life Insurance today!
