Which type of disability insurance is right for me?

In the event of an accident, injury or illness that prevents you from working, you will receive a percentage of your income with disability insurance. But not all disability insurance is the same. In fact, almost all of them will offset different percentages of your income (usually between 50 and 70 percent), along with different elimination and benefit periods. Elimination periods refer to the waiting period before your benefit starts. Benefit periods refer to the length of benefits, which depend on your disability and the policy you take out.

Most plans have a start date that ranges from 30 days to 120 days after a disability occurs. Cover generally focuses on illness or injury, and your plan cannot be changed without your consent until you are 65 years old.

In general, experts agree that disability insurance is a must for people, whether you have group insurance with an employer or take out an individual policy for yourself. But with so many plans available, it’s important to understand the differences between each. Here’s an overview of the main types of disability insurance available:

• Group Disability Plans: This is the most common type of disability insurance and is usually offered through your employer. The lowest level of group coverage often focuses on affordability, which is beneficial, but it does mean that benefits and payouts can vary drastically. Keep in mind that group plans will generally not cover your income level significantly, and this can be difficult during times when you are unable to work. They also often have monthly or annual limits on the dollar amount that will be paid, and set maximum terms that can be shorter than what you need. Group plans should always be read carefully as you can often find that what you may have thought you were getting is very different from what you actually get.

• Individual Disability Plans: If you do not have group insurance or do not like your group insurance, you can always opt for individual disability insurance. Without a group, the pricing is often very different and tailored to your unique situation and needs, which can be both an advantage and a disadvantage. In general, plans are cheaper if you are young, healthy and in a low-risk job compared to if you are older, in poor health, or in a job that is considered to be at high risk of disability. However, if you look at your individual options, you can find a plan that suits your needs, wants and budget more than a group plan. Doing the research can lead to a better policy and a better position for yourself.

• Disability insurance creditors: Disability insurance is now often tied to debt, such as car loans, leases, mortgages, and lines of credit. With creditor disability insurance, your financial institution purchases a group policy and you become part of the policy if you take out a loan from that institution. These policies make loan payments on your behalf rather than sending the money directly to you.

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While group plans are generally cheaper, individual plans offer better coverage and can be tailored to your specific needs, including better terms compared to a group plan. Please note that premiums, terms and conditions are fixed until you are 65, unless changes are made with your explicit consent. Individual plans are an excellent option for the self-employed, as well as professionals and executives, as they can have their own “occupational” definition of disability. That means an insurance company cannot force you to pursue another profession based on your experience and education, an important characteristic for many professionals. Professionals should be wary of association disability plans, as the terms, conditions, and rates for these group policies can, and often do, change at any time.

If you need disability insurance, be sure to research the policies you take out or currently have.