Supplementing Your Group Disability Insurance
When was the last time you sat down to carefully review your employee benefit handbook? A lot of people have the misconception that the benefits they receive from their employer are adequately going to cover their disability insurance needs.
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.
Have you evaluated the definition of disability of your group disability insurance policy? Is it own occupation? If so, is it own occupation for the full benefit period? Own occupation means that if due to sickness or injury, your policy would pay you a monthly benefit if you couldn’t work in your occupation even if you work in another occupation. Furthermore, if you are a physician, your occupation means your medical specialty. For example, if you are a surgeon and can no longer practice surgery, it would pay you a monthly benefit even if you decide to work in another medical specialty or in another occupation.
Some group policies offer own occupation for a limited period of time such as two years. After that period of time, the policy would pay only for a total disability. This may mean that it would cover you only if you were not able to work in any capacity.
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.
Some group policies only offer a total disability or a modified definition of disability which is more restrictive than an individual policy with an own occupation definition.
Supplemental disability insurance fills in the gap between your employer sponsored plan and the take home pay you need to pay your monthly expenses. When applying for supplemental disability insurance, there is a maximum amount of supplemental benefit you are eligible for based on your income and individual disability and group disability 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.
- Your employer can modify, change or drop the group policy at any time.
For more information about supplementing your group disability insurance policy with a supplemental disability insurance policy, contact the Set for Life Insurance office today!