After years of specialized education and training, you may have invested significantly in your career before it ever gets started. A long-term disability may put that investment in jeopardy by affecting your ability to earn an income. Disability income insurance is one way to try to protect that investment and your income, while you recover.
Group policies may be available to you as part of a professional membership or employment. An individual disability income insurance policy, on the other hand, may be purchased directly from an insurance company or broker.
There’s a lot to consider when comparing group versus individual coverage and in the event that you suffer a disability at some point in your career, your financial future may weigh heavily on your decision. Explore the differences as you consider which type of policy is right for you, your family and your lifestyle.
Unlike some group policies, your age and health may play a role in the pricing of an individual disability income insurance policy. A younger, healthier person may get access to lower premiums than an older person with long-term or chronic illnesses and or health risk factors. Both, however, may be able to pay the same premium in a group policy.
A major differentiating factor may be the degree of decision making you’ll have (or even be aware of). In group coverage, the owner of the policy (typically an organization) may renegotiate terms and/or change coverage without your consent or interests in mind. Essentially, you rent a group disability policy.
With individual coverage, your consent may be required for all policy changes, provided your policy is non-cancelable and guaranteed renewable, up until you reach a certain age. This means that the insurer can’t change or cancel your policy without your consent, as long as your premiums remain paid on time. You own and control an individual, non-cancelable disability policy.
A major appeal of group coverage may simply be cost, which may be lower than an individual policy, depending on a variety of factors. It is important to note that the cost for group coverage oftentimes increases with your age. A group policy may be less expensive initially, but after a certain point, actually become more expensive than had you purchased an individual policy with a level premium structure. Further, group premiums are not guaranteed as may be individual policy premiums. But consider the financial implications beyond price.
Another consideration about your premiums you pay (the premium is the cost of the policy to you) is whether they’ll increase or remain level year to year. Level premiums generally remain consistent from the time your policy begins to age 65. If coverage is increased, the cost for the additional coverage is added to the original premium. Graded premiums may begin with a lower premium cost than a level premium policy but premiums increase annually. Be sure you understand the premium structure of any policy, group or individual.
Make certain that the policy you chose provides coverage for both total and partial disabilities. In dentistry, an "own occupation" definition of total disability may be advisable. Under this definition of total disability, you are protected in the material and substantial duties of the occupation that you were engaged in just before the start of the total disability. Full benefits may be payable even if you return to work in a new occupation.
Definitions of total disability may change after a certain duration of total disability. It is oftentimes advisable to make certain that the policy you are considering provide an "own occupation" definition of total disability for the entire period for which you are eligible for benefits.
Partial disabilities are disabilities in which you are still able to work but are losing income. ie reduced hours due to a back problem. Disability benefits for partial disabilities are often paid in proportion to your income loss.
Under this definition of total disability, you are generally protected in the material and substantial duties of the occupation that you were engaged in just before the start of the total disability.
Group policies may also not be transferable if you leave the organization or employer that owns the policy. That may leave you with gaps in your coverage or without coverage and the subsequent need to acquire an individual policy when your age or health may negatively affect premiums or the availability of coverage.
As your income increases, the ability to increase your coverage in the future and to what overall amount (regardless of health) should also be considered when comparing group and individual policies. This feature is typically referred to as a Future Insurability Option and may be very important should your health status change. A cost of living adjustment option may also increase your benefits over time, in order to help keep pace with inflation. Ultimately, there are many different benefits that you may want to consider including with your policy.
Making the Right Insurance Decision for Your Needs
When comparing disability income insurance policies, the right choice for your lifestyle, family, and needs may not always be immediately clear. Make sure you thoroughly understand your options and talk to an advisor you can trust, before making a decision.
Whether you choose group coverage, individual coverage or group coverage supplemented with an individual policy, having disability income insurance may be crucial to your financial wellbeing if and when you’re faced with the unexpected.
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