Disability coverage is the type of thing most people don’t think about until it’s badly needed. However, it’s still one of the more important tools you have at your disposal when it comes to protecting your financial security, as anyone can experience an illness or injury that prevents them from working.
If you’re traditionally employed, you may already have group disability insurance through your employer. However, many people also choose to purchase private disability insurance. But is it possible (or advisable) to have both?
The short answer is yes. Not only can you carry both types of disability policies, but combining the two can be a very smart strategy for safeguarding your financial future. In this comprehensive guide, we’ll help you unpack how.
What Is the Difference Between Group and Private Disability Insurance?
Generally speaking, both group and private disability coverage serve the same broad purpose – supplementing your income if you ever do become disabled. But structure and delivery logistics can vary quite a bit.
Group disability coverage
This type of insurance usually comes from your employer as part of your employment benefits package. It’s convenient, it’s often also automatic, and it’s likely available at little to no cost to you personally. Common key features can include the following:
- Payouts are designed to cover roughly 40-60 percent of your income
- Employers may offer both short-term (e.g., 3-6 months) and long-term (e.g., multiple years or until retirement) coverage options
- Eligibility is often tied to employment status
- Enrollment requires minimal underwriting and is usually even automatic
However, it’s also important to understand that group policies come with certain limits. Examples include potential benefit caps, taxable payouts, and limited customization options.
Private disability coverage
Private disability coverage involves purchasing your own policy, separately from any packages your employer might be able to offer you. Key factors to consider when going this route include:
- You get to choose coverage lengths, waiting periods, and benefit amounts that align with your actual lifestyle and financial security needs
- You stay covered, regardless of employment status
- Premiums can vary according to age, occupation, and overall health
- You’ll likely need a health evaluation and financial review to determine eligibility and set your premiums
Ultimately, the biggest difference between group and private coverage is flexibility. Group coverage is convenient, but it comes with more limitations. Private coverage is portable and customizable. Check out this guide from our experts to learn more coverage essentials: An Introduction to Disability Insurance.
Can Group and Private Disability Policies Work Together?
Yes, absolutely. And in many cases, they should be combined and leveraged to work together. Private coverage can often protect you from potential income loss beyond what an employer’s group plan may be able to provide.
Coordination of benefits
If you happen to hold both types of policies, your benefits can be layered or otherwise coordinated with one another. Here’s how that works:
- Should you become disabled in the future, your group policy kicks in first and pays out according to its limits
- Your private policy then supplements this amount, which can help you better meet your actual income needs
For example, let’s say your employer-provided group disability covers 50 percent of your previous salary, but you also hold a private policy that covers an additional 30 percent. This means you could secure up to 80 percent of your original income, which can substantially reduce potential financial strain.
Just be sure to read and understand both policies thoroughly, so you know what to expect should you ever need to file a claim.
Advantages of Having Both Group and Private Disability Coverage
Naturally, no one counts on becoming disabled or not being able to work because of a sudden illness. But financial wellness is all about planning ahead, including for the unexpected. So, do you really need both types of coverage?
Enhanced financial security
Counting on just one type of coverage to carry you, especially one that comes with a lot of limitations, can leave you vulnerable when you need protection the most. Adopting a comprehensive approach instead leaves you better able to cover:
- Your mortgage or rent
- Essential health insurance premiums
- Ongoing retirement contributions
- Daily living expenses
Filling coverage gaps
Group policies often leave coverage gaps that people aren’t really aware of until it’s too late to do anything about them. Examples to watch out for include:
- Shorter benefit durations
- Lower income replacement amounts
- Strict caps on monthly payouts
- Taxability
Carrying a private policy in addition to your standard group coverage allows you to fill in and plan for some of these gaps.
Maximizing Your Disability Coverage
Whether you’re just getting started with your career, looking at pending retirement, or anywhere in between, understanding your disability policy options is critical. Know what you’d do if you ever became injured, ill, or disabled in the future, as well as how your existing policies will contribute to your financial situation.
Your income is the most valuable asset you have in your corner. It pays to protect it with the right options, something we fully understand at MyStages®. Contact our experienced financial team today for a consultation, and let’s discuss how to get you the protection you truly need!
