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Understanding Personal Disability Insurance and its Value

The Case for Individual Disability Insurance

Individual disability insurance is an option for people whose employers do not offer this type of coverage or for the self-employed. The benefits and premiums vary from one insurer to the next and among states. Expect to pay a high premium for disability insurance coverage that offer higher benefits, offer them for a longer period of time, and commence payments quickly following a claim. You also pay higher premiums for broader terms, meaning that the policy will cover more circumstances than the usual.


Nobody would like to face the prospect of disability but statistics have shown that a third of American workers will suffer a disability stretching to 90 days or more. Other numbers suggest that one in seven workers will have a disability that would run for more than five years. People do not really look at disability as something that could happen to them but the majority of long-term disabilities are due to illness like heart disease, diabetes, and cancer. Financial devastation is almost assured in a long-term disability that is why it is prudent to buy this insurance policy.

Disability insurance will replace a percentage of your income should you become disabled and cannot go to work. Many companies offer a disability plan that replaces 60% of a disabled employee’s lost income during disability. If you purchase supplemental plans or individual policies, they will cover as high as 80%. You will not find a disability policy that provides 100% income replacement as insurers believe the insured will no longer have the incentive to get back to work. Benefits are paid out for a fixed period of time or until you retire.

It is wise to contrast a group disability and individual disability insurance. You may find that you would still need to purchase supplemental coverage despite having coverage under a group plan.

Group Plans

Around 50% of medium- to large-sized firms offer long-term disability coverage that will pay benefits for five years at the minimum. There are times though that the group plan will not provide the protection that you need. Group plans have a benefit cap per month plus it will only insure your basic salary.

Most group plans will pay benefits for a limited amount of time after which you will have to prove that you really are unable to hold down any kind of work. The rationale for businesses is that a disabled employee can very well learn a new skill within two year’s time and be ready to rejoin the workforce.

Before you purchase an individual long-term disability insurance plan or to augment the one already provided by your employer, check your short-term disability coverage first. It would be pointless to buy long-term disability coverage with a short elimination period when your short-term disability policy will cover you for six months.

Individual Plans

While individual disability insurance plans are designed for self employed individuals or those whose companies do not offer disability coverage, those who are already covered by a group plan at work may still need supplemental insurance. Getting only 60% of your salary will clearly not be enough for your needs so you can purchase an individual disability plan that will cover an additional 10 to 20% of your salary.

Experts advise that if you have the resources, it would be better to opt out of your company-sponsored plan and purchase a comprehensive individual disability insurance altogether. An individual policy will offer you coverage even if you switch jobs plus you can sue your insurer if your claim is denied or if they delay paying your benefits. The trusted names in terms of individual disability insurance include Northwestern, UnumProvident, Mutual, and Metlife.

Buying Your Individual Disability Insurance

Buying an individual disability plan can be expensive. The premium cost will be based on an array of factors, which include gender, age, health status, occupation, and amount of coverage. Professionals like lawyers and doctors will certainly pay a higher premium than say an entrepreneur. It is a good thing though that there are free premium calculators online where you can run your numbers and get a ball park figure of how much your insurance will cost you. You may also like to consider riders to your individual disability plans such as the “own occupation coverage”, which is designed to pay benefits if you are unable to perform the exact work you did prior to the disability.