There’s an old saying that there are three types of people in the world: those with disability insurance, those without it, and those with supplemental disability insurance.
Okay, that’s not an actual saying, but it’s true. Disability insurance is a great way to protect your income if you are unable to work due to injury or illness. Many people receive some sort of group disability coverage through their employer. But is that enough?
Employer-sponsored life insurance usually isn’t enough protection for most people. The the same goes for disability insurance. That’s why we’re going to throw a third group of people into that age-old adage. That third group is people who need a private supplemental disability insurance policy.
Here are three questions you should ask yourself if you’re debating purchasing supplemental disability insurance.
Do I Need More Coverage?
As mentioned above, this is a common question for most people. Most simply don’t have enough coverage through their employer’s group plan.
Many group plans only cover 60 percent (or less) of your income. And since your employer is paying for it, it’s taxable. This means your actual take home pay could be closer to 40 than 60 percent of your income. Plans may also have maximum benefit amounts. This means the income received won’t be nearly what you used to receive.
Are you able to cut your expenses by half to make that workable?
Adding a supplemental disability insurance plan, may bring your coverage close to 80 percent. That’s much more manageable – and less of an impact on your lifestyle.
What’s the Strength of My Group Plan?
Most group plans aren’t as robust as a private disability insurance policy. Most employer-provided disability insurance plans are own occupation policies, for the first two years of disability before switching over to any occupation policies for the remainder of the benefit period; some may never be own occupation. If you have a residual disability and can’t perform your job to the same capacity as you could before – you’re still earning money, but less of it – your employer’s group policy might not cover that at all.
Compare this to a private disability insurance policy, where you can get own occupation covered for as long of a benefit period as you want – two, five, or 10 years, or even all the way to retirement age. Considering one in eight workers will be disabled for five or more years over the course of their career, having that flexibility in terms of length of coverage is crucial.
Your employer coverage might also be insufficient if you qualify for Social Security disability insurance (SSDI). Group coverage could be offset by your SSDI coverage. This means you won’t receive as much as you were expecting through your employer. The good news? There is no affect to your private policy.
Buying a supplemental disability insurance policy ensures you have the most comprehensive coverage possible. If you’re relying solely on group coverage you receive through your employer, you don’t have control of the policy type. This means you could leave yourself vulnerable to loopholes.
What’s My Plan for the Future?
If you have health insurance through your employer, you know that if you ever lose (or leave) your job, you’ll lose your health insurance, too. Group disability insurance works the same way. This goes back to the last point of not having control of your policy: if you leave, or if your employer decides to cancel coverage, there’s not much you can do about it. You’re at the whim of your employer.
If you don’t have supplemental disability insurance and you leave your current employer, whether to take a new job or start your own company, you’re back at square one in terms of coverage. And if you’re further on in your career, you may hit a roadblock if you decide that now’s the time to get your own coverage.
As with life insurance, disability insurance requires applicants to go through an underwriting process. If you’re in poor health or have pre-existing medical conditions, it could prove difficult to find affordable disability insurance coverage. That’s why – as with life insurance – the earlier you buy, the better your chances of getting the protection you need at a price you can afford.
How to Get Supplemental Disability Insurance
So you’re ready to get supplemental disability insurance coverage, right? Great! The best part is it’s not any more difficult than applying for a long-term disability insurance policy.
Buying a supplemental disability insurance policy is usually less expensive than buying a single standalone policy, because you’re usually buying a smaller amount to complement your group coverage. Including a future purchase rider will allow you to increase your coverage in the future, with no further underwriting, if you leave your company, lose your group disability coverage, and need more protection.
The only real difference in applying for supplemental disability insurance is disclosing that you already have group coverage in place. When disclosing your group policy, you’ll need to make known the coverage amount, the benefit period, and the elimination period (how long after your disability before you’re eligible for benefits). The amount you can apply for depends on how much coverage you have through your employer.
Having group disability insurance is a great perk from your employer. But it’s not enough to stop there. To ensure your family has protection, beef up your coverage with a private supplemental policy. After seeing all of the potential gaps in coverage – whether it’s the amount of income replacement you’ll get, the length of time you’ll be protected, or the flexibility you’ll have with your policy – you owe it to yourself to at least review your group policy and see how you can better fill your financial safety net.
This post originally appeared on Policy Genius.