For our professional clients, we typically recommend a combination of individual and group insurance.  However, to maximize both the amount of coverage you can obtain, and the quality of the coverage, we suggest that individual coverage be acquired before group coverage.

Why?

When you apply for individual coverage, companies will only allow you to insure a certain percentage of your salary.  For every $1.00 of group coverage that you have, the amount of individual coverage you can obtain is reduced by $1.00.

Conversely, if you have individual coverage in place, you are not subject to any limits on the amount of group insurance that you may obtain.

Group Insurance Plans have both advantages and disadvantages relative to individual insurance contracts.

Advantages

• Typically they are issued automatically without any medical underwriting.
• At the outset, they are almost always less expensive than individual plans.

Disadvantages

• Group plans are sponsored by an employer and do not go with you from one job to another.
• Group plans may be terminated by the insurance company.  They are not Guaranteed Renewable.
• If you leave the plan, or the plan leaves you, conversion options may not be as attractive as the original plan.  Typically, only individuals with health issues use the conversion privilege, therefore, many companies will have a product specifically used for conversions where benefits are more limited and/or premiums are higher.

Benefits under a group plan are integrated with Social Insurance Benefits.  For example, benefits paid by a group plan are reduced by any benefits paid by Workmen’s Compensation or Social Security.

Individual coverage

Though individual plans might be more expensive, the quality of the benefits may be far better.  For example, individual plans may offer a Cost of Living Adjustment (COLA) benefit that increases your benefits for each year of disability.  With a COLA benefit, the potential benefits for a 45-yo individual, could be 4 – 6 times greater than the benefits provided by a group insurance plan.

In addition:

• You own the contract.  If you change jobs, or occupation, your policy goes with you, the definition of your occupation changes to reflect your new situation, and the plan continues to provide the best benefits available.
• Individual Plans are Non-Cancellable and Guaranteed Renewable.  Benefits and premiums cannot be changed if you change employment or occupation.
• Benefits are paid in addition to any Social Insurance Benefits.

The following are just a few of the contractual issues that we consider to be important distinctions between Disability Income Insurance policies.

• Maximum Potential Benefits – How much could you receive in the event of a long-term disability?
• Definition of Your Occupation – Under what conditions will you be considered disabled?
• Partial (aka Residual) Disability Calculation – if you are partially disabled, how much of an earnings loss must you experience to qualify to receive benefits?
• Elimination Period – the number of days you must be disabled before benefits become payable.
• Accumulation Period – the maximum number of days within which you must complete the elimination period.
• Benefit Indexing – will the amount of insurance you purchased keep pace with inflation?
• Definition of Pre-Disability Earnings – this definition can be particularly important for self-employed professionals.
• Cost of Living Adjustment Provision – if you are disabled, will your monthly benefit keep pace with inflation?
• Premium Structure – Are annually increasing | graded premium options available?