If you are like most people, you might see that your company offers you some pretty good benefits. One of those benefits just might be group disability insurance. You say ‘great’ and sign right up. The money comes right out of your paycheck and you think ‘at least if something happens I am protected’. That’s perfectly normal. Just like any healthy well adjusted person you think two things: 1. I’m never going to need it, and 2. I’m covered just in case.
What most people don’t realize is what ‘covered’ means. If you are really on your group disability insurance the key is that you don’t control the coverage that you have, your employer does. Whether it is good, great or horrible coverage is up to you to figure out. Last time we looked at 7 Ways Your Group Disability Insurance Will Fail. Today, we’ve got a few more things to add to the list.
- You could loose your job. Your group disability insurance policy is dependent on you having a job. Since it is offered through your employer, if you loose your employment you loose your policy. The next job you get may or may not offer the same benefits. Also, if they don’t, you maybe paying more for your individual disability insurance policy because your not getting any young and your health probably isn’t getting a whole lot better.
- You could loose your policy. Your employer controls your policy. They decide how good of coverage the group disability insurance policy will offer. Just because you have a good policy today doesn’t mean you will tomorrow. When times are tough your employer could easily decide to cut coverage to save money. Or worse yet, they could drop it all together.
- Expect the premiums to increase. It’s a group benefit. Just like your health insurance, every time your plan is up for renewal you are most likely going to see a premium increase. Unlike, health insurance, some of the larger group disability insurance policies might lock in premiums for 2 or 3 years. However, they are still going to increase soon whereas an individual disability insurance policy the premiums are locked in as long as the policy stays in force.
- It’s an ERISA plan. Group disability insurance plans fall under a federal statute called the Employees Retirement Income Securities Act (ERISA). The biggest downfall for this in regards to disability insurance is appeals. If you were to get denied a claim through a group policy there are a lot stricter set of rules to follow. You’re options are also a lot more limited. For instance, through ERISA you are not entitled to a jury trial and you will almost never receive any type of attorney’s fees or punitive damages.
- It’s limited to your employment income. Do you have any income that you receive outside of work? When I say that I mean earned income. Any unearned income will offset you disability benefit in an individual policy. However, any earned income outside of your employer will not be covered. Maybe you have a side job that you receive income from or a second job, these are not covered.
It’s not unusual to find out that the coverage you thought was great is grossly inadequate. Do you, and more importantly, your loved ones a favor, review your coverage. Talk to a qualified financial professional when you don’t understand what they are telling you come ask me. An insurance assessment is a great way to learn about what you do have and make better decisions with your money. Most people will supplement their group disability coverage with an individual disability insurance policy to fill the gaps and/or shortfalls.