Disability insurance is of utmost importance; knowing what are some of the differences between individual and group disability income insurance plans is likewise essential. Well, you will know its two significant differences as you read further.
Some would further acquire individual insurance to protect themselves and their families because group insurance has some drawbacks. There are some instances in which this policy won’t pay for the benefits. Unfortunately, various group plans will not pay for the types of disabilities that usually occur.
So even if you are covered, it will seem like you are not. More so, it is not guaranteed that every employer will be providing a long-term disability insurance plan.
In this post, you will know if you need to acquire an individual disability plan. You should also check whether or not a group disability insurance plan is covering you. So without further ado, let us get to know these two types of insurance.
Group Disability Income Insurance Plan
Most companies are providing some long-term or short-term disability insurance to their employees. This is a part of the whole benefits package. This type of policy offers a percentage of a person’s monthly income in occurrences in which they cannot work.
The coverage limit will depend on the income of the person and the chosen policy of the employer. A group insurance policy is designed in such a way that it will eliminate the risks of disability claims. This makes it less expensive as compared to individual insurance.
Individual Disability Income Insurance Plan
Coverage plans offered to employees vary across different companies. As a result, people acquire this coverage with the concern that their employer’s policy might not provide enough amount when needed to look into individual insurance.
This is also recommended for employees of small companies that do not provide disability insurance and for those who are self-employed. When purchasing an individual disability policy, you should decide the disability amount according to your needs and income level.
In general, private insurance is setting a fixed amount of premium for each term and type of coverage. This makes an individual policy more expensive as compared to a group policy.
Furthermore, the terms of an individual disability policy are more flexible. For example, it has two clauses, including total and partial disability, whereas group insurance only provides total disability coverage.
2 Differences Between Individual And Group Income Insurance Plans
So, what are some of the differences between individual and group disability income insurance plans? Here are the following:
#1. Cost
A group disability policy is not as expensive as compared to an individual policy. That is because group policies are provided by their employer, which means that the employees do not need to expense for it. This is often offered as one component of the benefit plans for employees.
Since the risk is being spread out over a group of people, the cost of this disability becomes lesser. But in general, the premium in group insurance may increase as the company renews the coverage annually. Premiums of individual policy, on the other hand, will stay the same throughout.
#2. Benefits
The cost of a group, disability income insurance, is lesser since the benefits that it will give are also less. When an insured person becomes disabled, it will most likely take longer before the insurance provider pays for the benefits, and the payments given will not last that long.
In group insurance, the monthly benefit will rise as your salary increases. The same goes for its cost. But for individual insurance, the benefit set on the issuance of the policy will not change unless an automatic increase or future purchase option is added.
3 Riders Of Individual Disability Income Insurance Plans
Most insurance providers are offering optional benefits, which are referred to as riders. This is to enhance disability coverage. Below are some of the most common riders:
#1. Future purchase option
This type of rider will allow the insured to acquire additional disability insurance when income increases. To get this, you need not provide medical insurability. Therefore, even though you develop a particular condition that is said to prevent you from acquiring additional coverage, you may as well have your benefits increased.
#2. Adjustments for living costs
This will provide an increase in your annual benefits the year after you become disabled. The growth will be based on the CPI or a predetermined rate. With this, the benefits entitled to you will keep up with inflation.
#3. Residual benefit
This will be paying you a portion of your benefit if your income has dropped due to your disability. Generally, there is a minimum rate of earnings loss to qualify for this.
It’s A Wrap!
What are some of the differences between individual and group disability income insurance plans? As a recap, cost and benefits are the major ones. Additionally, group insurance has some limitations that individual insurance doesn’t.
For instance, it cannot protect your occupation. Furthermore, it does not pay for partial disability which usually occurs. Not only that but the premiums will increase while in individual insurance, premiums will stay the same.