Is Employer Disability Insurance Enough?
It is common for many employers to offer long term disability insurance to their employees as a part of their benefit package. Many people wonder is this sufficient coverage to protect their income? While it is a nice benefit to have employer provided disability insurance, the fact remains that there are a few problems relying only on your employer group disability insurance.
1. Not portable
The first issue with employer group disability insurance is that you cannot take it with you if you leave your employer. The truth is, you will leave your employer at some point in the future, and this could leave you in a vulnerable position when trying to protect your income. Your future employer may have group disability insurance as well, but what if they don’t? What if you decide to start your own business someday? If your health situation changes, you may be at risk of not qualifying for your own long-term disability insurance policy. For this reason, it is crucial you buy an individual disability insurance policy to supplement your employer policy while you are young and healthy. The individual policy stays with you no matter where you work or where you live.
2. Taxable
The second problem with relying only on your employer disability insurance is that the employer policy will be a taxable benefit. This means you most likely won’t be able to replace your take home pay if you were to be disabled with just an employer policy. Most group plans offer a benefit amount of around 60% of your income, but then once that amount gets taxed, you may be left with only about 40-45% of your gross pay. An individual disability insurance policy provides a tax-free benefit, which will target replacing your take home pay so you can continue living life to the fullest extent possible even if you can no longer work.
3. Lack of Control
A third issue with employer cover is that you do not control the policy. Your employer owns the policy and can change the coverage at any time. This means they could reduce the coverage amount, change the benefits, or even end the coverage all together. This would leave you with little to no coverage if you did not have your own individual policy. Having your own individual policy leaves you in control of the benefits and when you ultimately decide you no longer need income protection.
4. Not True Own-Occupation
Finally, the last issue with employer disability insurance is that it is not true own-occupation coverage. This can be a big deal for many specialized occupations such as physicians or dentists. Employer policies most often have an “any occupation” definition of disability. This means if you can work in any capacity in which you are suited for by education, experience, or training, you would not be considered disabled. A true own-occupation definition protects you in event that you can no longer perform the material and substantial duties of your regular occupation, even if you are employed in another occupation. For examples on how this plays out with each definition, refer to our prior blog titled “What is true own-occupation.”
Securing your own private individual disability insurance policy while you are young and healthy is the best security and investment you can make in protecting your future income. Employer disability insurance is a nice benefit, but it needs to be supplemented with your own personal policy. You can check your own rates and see how much coverage you need to supplement your employer policy by filling out a quote request here.
