Group Disability Insurance - 3 Devastating Misconceptions
We plan for Life insurance coverage during working years, and we plan for investments for our retirement, but do you or your spouse have enough disability insurance in place to protect your income… so you can maintain the lifestyle you currently have without having to tap into those same investments or savings to pay your bills? READ THIS because it probably pertains to you or someone you know. Ever hear of someone suffering a “living death?” That is what happens to not only the disabled person, but also their family if a solid disability plan of action is not in place.
- Hey, I have group coverage through work so I am all set! Really!? What amount or percentage of your income are they replacing? Some plans replace 40 or 60%, which is more than likely not enough. Why? Chances are your employer is paying all or most of the premium for that benefit, and when the employer pays, if you or your loved one has to go on claim, that 40 or 60% of your income replacement is taxable, so are you really getting 40 or 60% of your gross income replacement? Do your family a huge favor and read your group coverage fine print. There is probably room to get another individual disability policy to make up the monthly coverage shortfall; even if it is only indemnifying 10-30%...every little bit helps!
- Another issue with only having group coverage is the definition of what is considered “disability” by the carrier/insurer that provides the coverage. You may have a policy that has a definition of disability that says, “the person can’t do the material and substantial duties of any occupation for which he is reasonably suited through education, training, or experience”, which reinterpreted means, they aren’t going to pay the claim! How can that be? Easy, if you can’t be a doctor and see patients because of dexterity issues, you could still probably “teach” about how to be a doctor in your given field. Whereas, if your group contract has the definition that says own occupation in place of any, you would have a better contract because if you can’t see patients, you can’t work and make a living, so they’d be more apt to have to pay the claim. Some contracts, in fact, many of them, are a hybrid of the two. It will give you the own occupation definition for the first two years on claim, but then changes over to the any occupation definition in year three. These are risky also.
- How long will your long-term disability plan cover you once you are on claim? Many will cover you to retirement, whether age 65 or 70, but that is a risky assumption to make as some plans will only cover for a minimum duration, such as 2 or 5 years. You have to ask yourself, just how “long-term” is a 2 or 5 year payout? Not very long if you are in your early working years and become permanently disabled for the rest of your life. How good is that 2 or 5 year plan then?
The bottom line is, always read and understand how your group policy works, and speak with a specialist if you do not know if it is sufficient enough coverage for your family. If you do not have any disability insurance at all, then you definitely need to speak to a specialist to discuss your options of protection! Don’t let your family suffer because you didn’t!
About the author: Kyle McDonald holds FIC, FICF, FSCP® & CLTC designations. His viewpoint on life insurance is simple, “Anyone with a family must have life insurance. In the end, life insurance is for others you care about, not you.” He is ready to help you and your family get the best option available. Contact Kyle today at 1-800-651-1953 or KMcDonald@Pivot.com.