When was the last time you sat down to review your employee benefit handbook? A lot of people have the misconception that the benefits they receive from their employer are enough.
If you are a full time employee and work for an employer who offers group benefits, chances are you have group disability insurance benefits. Group benefits typically cover about 60% of your gross income to a maximum level amount (for example $10,000/month). If the employer is paying the premiums, the benefits are taxable. If you leave your employer, you may not be able to take your disability policy with you.
Furthermore, what would happen if you changed jobs? Most group disability policies are not portable. This could leave you without any coverage. Or, what would happen if your employer decided not to offer group disability insurance anymore? What if you decided to work as an independent contractor? Typically you are then on your own for your disability insurance needs.
Is your group disability insurance enough? Calculate your monthly needs after tax. Then calculate your salary at 60% and tax the remaining amount. If the net amount is less than your monthly expenses, you should consider adding an individual disability policy to supplement your benefits.
An individual disability policy can provide a supplement to fill the gap between the employer sponsored plan and what your monthly needs are if you were disabled.
Supplemental disability insurance fills in the gap between your employer sponsored plan and the amount you need to survive financially if you become disabled. When applying for supplemental disability insurance, there is a maximum amount of supplemental benefit you are eligible for based on your income and group benefits in force.
There are several advantages of carrying supplemental disability insurance.
- If you leave your employer, you can carry your individual policy with you and increase it as your income increases.
- It protects your insurability. If you experience an adverse change in health, you can increase your supplemental policy in the future without worrying about losing your group benefits if you leave your employer.
- Your supplemental disability benefits are non taxable if you are paying the premiums with after tax dollars.
For more information, contact the Set for Life Insurance office today!