Balancing Group and Individual Disability Coverage

For most of us, the ability to earn an income is our most valuable financial asset. That’s why it’s so important to think about how your income would be protected if you became unable to work due to illness or injury.

According to the Social Security Administration, today’s 20-year-old faces more than a one-in-four chance of becoming disabled before reaching retirement age.¹ If that day ever comes, would your current coverage be enough?

Why Relying on Social Security Isn’t Enough

While Social Security Disability Insurance (SSDI) can offer some help, it’s far from a complete solution. Roughly two-thirds of initial SSDI applications are denied, and for those who do qualify, the average monthly benefit is just $1,580.² ³ For families accustomed to a higher standard of living, that may not come close to covering essential expenses.

What Group Coverage Provides

Many employers offer group disability insurance, often covering all or a portion of the premiums. These plans typically replace up to 60% of your income if you become disabled. While helpful, this may still leave a sizable gap — especially when you consider that those benefits may be taxable if your employer pays the premiums.

How an Individual Policy Can Help

Adding a personal disability insurance policy can help fill that gap. Benefits from policies you pay for yourself are typically income tax-free, and while you may not be able to replace your entire pre-disability income, you can come much closer to covering your actual take-home pay.

For high earners, entrepreneurs, or anyone with ongoing financial commitments, supplementing group coverage with an individual policy is a proactive step toward greater income protection.

Important Policy Features to Consider

When evaluating policies — whether group, individual, or both — pay close attention to the waiting period, or how long you must be disabled before benefits begin. Choosing a longer waiting period can reduce your premium, but you’ll need sufficient savings to bridge the gap.

It’s also worth aligning your long-term policy’s waiting period with the length of any short-term disability coverage you might have. For instance, if short-term benefits last 90 days, selecting a 90-day waiting period for long-term coverage can help you avoid unnecessary overlap and costs.

Finally, understand how each policy defines disability. Some require that you’re unable to work any job, while others use an “own occupation” definition — meaning you’re covered if you can’t perform the duties of your current profession. The latter is generally more favorable, especially for professionals and business owners whose skills may not translate to lower-paying work.

The Bottom Line

A disability doesn’t just disrupt your life — it can destabilize your finances, too. A thoughtful approach that blends group and individual coverage can help you stay on track, even when life takes an unexpected turn. If you’d like to review your current coverage and explore ways to strengthen your income protection strategy, we’re here to help.