Disability Insurance Basics

Individual/Group Disability Policy Alternatives

Individual policy
DescriptionConditionsAdvantagesDisadvantages
A policy you buy through your insurance agent that pays you disability benefits when you are sick or injuredYou must meet the underwriting criteria set by the insurance company for occupation, health, habits, avocations, etc.
  • Benefits are tax free if premiums paid with after-tax dollars
  • Flexible policy benefits and features such as lifetime benefits, cost-of-living increases, partial benefits, etc.
  • Provides the most comprehensive coverage
  • Premiums generally can't increase
  • Generally, you can't lose coverage if you pay the premiums
Most expensive type
Group policy issued through an employer
DescriptionConditionsAdvantagesDisadvantages
A disability benefit you receive through your employer; your employer may or may not pay part of the premiumsYou have to be a member of the group (in this case, a group of employees) that sponsors the insurance
  • Low group premium
  • Available as short- or long-term coverage (or both)
  • Usually, you don't have to prove insurability
  • Less flexible benefit design than individual disability policies
  • Will terminate when employment ends (non-portable)
  • Premium will increase as you get older
  • Definition of disability may be less liberal than individual coverage
  • Benefits will be offset by Social Security, workers' compensation, and some other types of disability insurance
Group policy issued through an association or organization
DescriptionConditionsAdvantagesDisadvantages
A disability policy purchased through an association or organization, such as the New Hampshire Realtors AssociationYou must be a member of the group that sponsors the insurance (in this case, a trade association or organization)
  • Low group premium
  • May have more liberal underwriting requirements, although not guaranteed acceptance as with employer groups
  • Less flexible benefit design than individual disability policies
  • Definition of disability may be less liberal than individual coverage
  • Contracts may be cancelable by insurance company or association
  • Premium will increase as you get older

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