The Differences In Disability Insurance Policy
Disability Insurance Policy
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By now you know that you need disability insurance—one way or another. It's far too expensive not to have some kind of disability insurance policy in place. Otherwise, you could end up with nothing, earning nothing, while your bills keep going up. And all the while in tremendous pain. (Hopefully you at least have health insurance to pay for those medical bills!)
But what is the difference between an individual disability insurance policy and a group policy? A group insurance policy is provided by an employer. That means they pay the premiums and your disability insurance is taken out of your paycheck. Most people have this type of coverage, and prefer it, since it requires the least amount of effort to maintain. An individual disability insurance policy is offered by private insurance companies usually offer more flexibility and benefits.
A good disability insurance policy can replace your lost income whenever you become disabled and can't work. You will usually get 45%-60% of your gross monthly income.
Some Major Facts About Group Disability Insurance
This type of coverage, employer sponsored, is also referred to as long term disability insurance. There are advantages and disadvantages to both types of policies. As mentioned the biggest advantage is that for long term disability, the employer pays the premiums and the insured doesn't have much to worry about. Group policies are also less expensive, and allow for even low-income workers to be insured. Another advantage is that there is no medical exam required and even individuals with poor health can be instantly covered by the employer.
However, there are some major disadvantages to group policies, that eventually cause many insured to seek out an individual disability insurance policy. For one thing, all of the disability income that comes to you in the event of an injury is taxable. Two, group plans are usually more restrictive about details, including arbitrary changing of the rate and restricting partial disability. Worse yet, the policy could be canceled at any time by either the company or your employer.
Facts About Individual Disability Insurance
An individual disability insurance policy on the other hand, are very flexible and yet firm about sticking to your signed contract. Disability income is tax free, and companies allow for much more flexibility in definition, along with added benefits. Best of all, even if you change jobs or location the policy remains in tact, usually at the same rate. Disadvantages include a screening of applicants by the insurance companies as well as a more expensive policy.
When considering a disability insurance policy try and compare the plan details, which are found in the contract. It is important that you find a good plan for your location and that you find a company whose name you trust. A good idea is to check the company history before you sign—make sure it's financially stable and trustworthy. One thing is for certain: whether you have a longterm or individual disability insurance policy, your finances are secure!
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