If you are like most people, you don't spend much time thinking about your company benefits. That is, until you need to use them. At that point most employees usually find out their "great benefits package" has holes in it.
Many employers offer group disability coverage. While it is a good idea to take advantage of the group coverage, understanding how it works, and where it falls short is vital. The most important thing to remember is group coverage is tied to your employment, so if you leave your job or lose your job, you are not covered. Also, the coverage is tied to your base salary. Bonuses, commissions, incentives and retirement contributions are typically not included. That can really alter your ability to pay your bills if your household depends on that extra income.
Group short term disability benefits vary in the amount paid out and may have a short elimination period or begin immediately. However, group long term disability typically has a 90- day elimination period (the time you need to wait before benefits kick in). The benefit is limited to 50-60% of your base salary, and likely has a maximum monthly benefit. And because it is provided by your employer, this money is taxed. That is a major consequence of borrowing your benefit and not owning it.
I say that because when you have an individual disability policy, the benefit that comes to you is not taxed, because it is paid for with after tax dollars. And since it only covers 60% of your income, its likely every dollar counts to your household.
Too often, people don't think they'll need something like "disability insurance". Maybe they work at an office, in a desk job—something that don't consider very risky for an accident. However, 90% of disability claims are due to illness. Let's take a look at that again—90% of claims paid out are not because someone was in an accident and fell off of a ladder, or are injured skiing, its because they may have had a heart attack, a stroke, are dealing with cancer. And another important number to keep in mind—the average claim runs slightly more than 2 and a half years. Take that in for a moment. Ask yourself, would your family continue to survive and thrive if you were unable to work for more than 2 years?? While, many times following an illness or accident, people can return to work, some can't. 1 in 5 disabled workers will be disabled 5 years or more.
Sobering statistics. It is not easy to get approved for disability benefits. There is a very good reason the underwriting is very thorough – because it is a benefit that is used often.
If your household depends on your income, you can't afford not to have your own disability policy to protect your income. Contact me at firstname.lastname@example.org to discuss protecting your biggest asset, YOU.