Broker Check

Individual Disability FAQ

How Much Coverage Should I Have?

In most cases, the goal is to have enough coverage, so that when combined with other sources of income, you are able to maintain the same standard of living that you had while working. The maximum monthly benefit you can have is based on your annual income. Most carriers use an income-to-benefit chart that gives an outline of the maximum coverage you are eligible for. In most cases, benefits from individual policies are paid to you tax-free.

Some employers may offer group disability coverage.  The provisions of group contracts are different than privately owned policies and benefits are often taxed. Many individuals choose to have individual coverage in addition to group benefits to provide an extra layer of protection.

What Are Common Policy Exclusions?

Benefits generally will not be paid for a disability:

• Caused or contributed to by an act of war, whether declared or undeclared
• Due to normal pregnancy or childbirth (most policies do cover complications of pregnancy)
• Due to your committing, or attempting to commit a felony
• Existing while you are legally incarcerated or detained
• Caused by an intentionally self-inflicted injury

It is important to note that a medical condition that existed prior to the purchase of your disability policy may be excluded from coverage or require a reduced benefit. Depending on the condition, the exclusion/limitation may be permanent or temporary.

What Should I Know About My Group Disability Insurance?

Disability coverage through work is often a cost-effective way to protect yourself against a disability.  You should be aware that many of the contract provisions are more restrictive in group policies than in individual policies. For example:

Maximum Benefit
-  Group long-term disability insurance is a great start, but may not be enough. Most plans cover 50%-60% of base salary up to a maximum determined by the employer

Benefit Reduction - Most group benefits are usually taxable and can be further reduced by Social Security, pension benefits, workers comp, income earned in a different job, other group insurance, etc. 

Group Disability Benefits Are Not Guaranteed, nor are they portable. If you change jobs or if your employer changes or cancels the group disability contract, you could see a reduction in your benefits or lose your coverage completely. Individual disability policies are portable and controlled by you, not your employer.

Definition of Disability
-many group disability plans contain a weaker definition of disability, such as modified own occupation or any occupation.  This may reduce your ability to collect benefits from the policy.

Could you survive on a 50% - 60% pay cut if you became disabled? Individual disability insurance can help bridge the gap.