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The way to know in case your workplace group disability insurance is enough


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If you happen to’ve opted into your organization’s group disability insurance plan, you might assume there’s sufficient income protection if you happen to cannot work as a result of illness or injury. But experts say your workplace coverage will not be enough.  

John Ryan, founder and CEO of Ryan Insurance Strategy Consultants, urges employees to embrace group disability insurance, but warns “there could be a false sense of security with the employer plan.” 

For workers, group disability insurance offers guaranteed coverage at low or no cost, but you want to know what’s “under the hood,” he said, speaking on the Financial Planning Association’s annual conference in Seattle on Wednesday.

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It’s estimated that 35% of personal industry staff have access to workplace long-term disability insurance coverage and 43% have access to short-term disability coverage, based on a September report from the U.S. Bureau of Labor Statistics.

There are two forms of group disability insurance: short-term, which pays a brief profit, and long-term, which lasts for an prolonged time frame.

You’ll be wanting to examine the plan’s “exclusions and limitations,” outlined within the policy’s summary plan description, Ryan said. If anything raises a red flag, speak up and ask for clarification. 

It is also necessary to know the way much income is roofed, since some policies protect only your base salary, not bonuses or commission. What’s more, you want to know whether the advantages received are before or after taxes, Ryan said.  

Why the policy’s definition of ‘disability’ matters

One other key detail is how your group plan defines disability, Ryan said. Probably the most generous definition, “own occupation,” permits you to collect advantages if illness or injury prevents you from working in your current occupation. One other, “any occupation,” means you are not in a position to work any job.

Ryan said company plans typically use “own occupation” definition for the primary two years of a claim. Once the definition changes, it might be harder to say disability advantages if you happen to can still work one other job. It’s most difficult to say advantages with the “any occupation” definition.

Nevertheless, many policies are “more favorable than people think,” after the two-year period, he said. For instance, the definition may include “the numerous and substantial duties of an occupation that is reasonable based on prior training, education and experience,” he said. 

“That is so much higher definition,” Ryan said. “Reasonable” has been determined by the court system to be an occupation where it’s essential to earn no less than 60% of your previous income inside a 12-month period. “In order that rules out selling pencils on the road corner,” he said.

The way to ‘cover the gaps’ in group disability coverage 

If you happen to discover shortfalls in your group disability plan, it’s possible to “cover the gaps” with a person policy, Ryan said. But it might probably be a “tough underwriting process” and pricing could also be a priority, he said.

Nevertheless, individual policy pricing could also be more flexible with certain features scaled back, Ryan said. It’s more necessary to have “some level of coverage” than to skip extra protection when it’s needed, he said.

For guidance, Ryan encourages consumers to tap an experienced disability insurance broker who works with a couple of company. 

Currently, 14% of consumers have individual disability insurance coverage, down from an all-time high of 31% in 2012, based on LIMRA, a corporation of economic services and insurance firms.

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