Many people own group disability insurance at work, but if you are like most people you have never read the actual contract. You likely have an employee booklet, but the wording of the contract will not be found there because your company administrator keeps it filed away. Every plan is different so the wording of your policy should be reviewed.
As an alternative, you often have the right to opt out of the group plan to purchase an individual private plan, and here are 7 reasons to check it out. Note that every policy is different and this blog is not a comparison, but rather a guide to begin your research. When looking at the personal plan in this blog, we are looking at a professional policy.
Monthly Benefit: Personal coverage can be purchased at a full and maximum level based on your income. Group coverage can have a flat limit set for everyone in the group even if your income would otherwise qualify for more. For example everyone might have 70% of income to a maximum of $2,500 per month. If your income were $50,000 you should receive $2,916 per month but you only receive $2,500.
Taxation: Personal Plans have tax free benefits if you are paying the premium yourself. Group disability can be fully taxable if your employer pays even one cent of the premium. In the above case, would you rather receive $2,916 tax free, or $2,500 less tax?
Definitions: In a personal plan, the definitions are set in stone when you buy a policy and will not be changed regardless of the company’s experience. Group plans are renewable annually and the contract wording can be changed every year.
Premiums: In a personal plan, the price can be guaranteed to age 65, however in a group plan, the premiums change annually- and usually up, as the average age in the group increases.
Integration with other plans: Personal polices can be set from the beginning so the benefit is not reduced by other plans in effect at claim time. Group benefits are often reduced by what you receive from Canada Pension Plan, auto accident benefits and other plans.
Exclusions: Both Personal and Group plans generally exclude Act of War, Incarnation, and normal childbirth, however most group plans will also exclude self-inflicted injuries, Injuries while committing a crime and others.
Portability: If you change jobs, the personal plan is owned by you, so you can keep it wherever you work or travel in the world. Group insurance ends when you leave your employer, and you often need to reapply for coverage at your new job.
The cost difference between a group plan and a personal plan is not the only point of difference. In fact, the personal premium can be adjusted based on the exact design of your policy.
You owe it to your family to take a look at a full comparison. Talk to a disability specialist.
Corry Collins is a Certified Health Specialist (CHS) specializing in the area of living benefits and disability insurance.
If you are in Nova Scotia and would like some insurance advice, please contact Corry Collins:
902-444-7000
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