| Millions of people are insured by group long term | | | | two years. After that, if you can sell pencils on the |
| disability plans. However, there are drawbacks to this | | | | street, the insurance company will not pay. |
| coverage and situations where the policies will not pay. | | | | Certain occupations can be covered forever by |
| Unfortunately, many group plans do not pay for the | | | | individual policies. For example, if a urologist becomes |
| type of disability that is most likely to occur. | | | | disabled to the extent he or she cannot practice the |
| Theoretically, you are covered. But are you? | | | | specialty of urology, but could teach urology at a |
| Let's contrast some of the more important contract | | | | medical school, the individual policy would continue to |
| provisions in a group LTD plan and an individual policy. | | | | pay the disability benefits. Moreover, the doctor would |
| You can come to your own conclusion. | | | | receive both the individual policy disability benefits and |
| Can the Coverage Be Cancelled? | | | | the medical school teaching salary. |
| Group LTD plans can be cancelled in two ways. First, | | | | Presumptive Disability |
| the insurance company can cancel the plan if their | | | | Disabilities that are "presumptive" are those where the |
| claim experience is bad. Second, your employer could | | | | insurance company will pay the full benefit even if the |
| decide to terminate the plan at any time. If a company | | | | person is fully employed. Examples are the loss of use |
| can downsize, it certainly can curtail benefits. | | | | of two limbs, loss of sight, hearing or speech. A person |
| When you buy an individual disability insurance policy, | | | | who is in a wheel chair because they lost the use of |
| the insurance company can never cancel the policy. | | | | their legs in a car accident is a typical example. This is |
| You alone decide when you want to coverage to | | | | a benefit provided by individual policies, but not by |
| stop. | | | | group LTD plans. |
| Can Premiums Be Increased? | | | | Partial Disability |
| If the insurer sees an increase in claims, it will raise the | | | | This is the most important distinction because over |
| premium on a group LTD plan. Individual policy | | | | 70% of the claims filed at insurance company home |
| premiums are frozen for the duration. | | | | offices are for partial disability. The person is not |
| Portability | | | | completely unable to work. Their disability may only |
| What if you change employers? You cannot take | | | | allow them to work a certain number of hours per day |
| your group plan with you. By contrast, your individual | | | | and their salary is adjusted downward accordingly. |
| disability income plan is completely portable since it is | | | | An individual plan pays a percentage of the total |
| not tied to any company employer. | | | | benefit that represents the percentage of income lost. |
| Today, the average person will change jobs 7 times | | | | For example, if a person making $5,000 a month with |
| during their career. There is no assurance that each | | | | a $3,000 a month individual policy benefit loses 60% of |
| employer will offer a long term disability plan. | | | | their income due to a disability, the policy would pay |
| Taxation | | | | 60% of $3,000 or $1,800. Most group plans do not pay |
| Group long term disability benefits are taxable just like | | | | for a partial disability. |
| income. Individual policy benefits are 100% tax-free. | | | | Conclusion |
| Offsets | | | | You have seen that group long term disability income |
| Group LTD benefits are reduced by the amount of | | | | plans can be cancelled, premiums waived and lack |
| benefits received from Social Security, Workers | | | | portability. Benefits are taxable and are offset by other |
| Compensation, state cash sickness program, etc. | | | | plans. They posses no ability to protect an occupation |
| Individual policies have no offsets. | | | | and, most important, most do not pay for the type of |
| Own Occupation | | | | claim most likely to occur: partial disability. |
| Individual policies have the ability to protect the individual | | | | Individual disability insurance plans do not have these |
| in his or her "own occupation." Typical wording for the | | | | limitations. They cost more, but when it comes to |
| definition of disability for group LTD, as it pertains to | | | | disability coverage, you get what you pay for. If you |
| occupation, goes something like this: "For the first two | | | | get in an accident or develop a sickness that inhibits |
| years, the inability to perform each and every duty of | | | | your ability to put food on the table, your thoughts are |
| your occupation; after two years, the inability to | | | | not focused on what the premium is for your disability |
| engage in any gainful occupation." | | | | income insurance coverage. You simply want to know |
| This means you are covered in your occupation for | | | | when your disability check will arrive in the mail. |