What is the difference between group and individual disability insurance?
If you are suffering a disability which prevents you from working you may have coverage for disability benefits under a group insurance policy at work or an individual disability policy.
Group Disability Insurance
Many companies and employers offer a short-term and/or long-term disability insurance plan to employees as part of their benefits package. These disability policies provide a percentage of a person’s monthly income if they are unable to work. The level of coverage that you are eligible for depends on your income and the specific policy.
Group insurance is structured to spread the risk of making a claim and the cost across the entire company, and therefore, they tend to be less expensive than individual insurance plans. There is also usually no required medical examination and it is easier to qualify. They come to an end if your employment ends so they are not portable.
Individual Disability Insurance
If you are self-employed or employed by a smaller company that does not have a group disability insurance policy, you may need to purchase an individual plan so that you have some benefits in the event you are unable to work due to disability. You can decide the monthly disability benefit that will be payable based on your income level and needs and cater the policy to your desired monthly premium and payout.
Typically, private insurance is set at a fixed premium for the type and term of coverage and therefore, they are generally more expensive than group policies. They do tend to have more flexible terms and they can be tailored to replace a larger percentage of your income. They can be customized to include cost of living adjustments, residual disability or own-occupation protection and the policy stays with you if you change jobs or become self-employed.
For best protection, many individuals opt for both a group policy for baseline coverage and supplement with an individual policy for additional income in the event they are unable to work due to disability.
